Mortgage costs are climbing rapidly across the United States and parts of Europe as the economic impact of the Middle East conflict continues to ripple through global financial markets, putting additional pressure on homebuyers despite central banks keeping interest rates unchanged.
A report by the Financial Times published on Monday revealed that the average 30-year fixed mortgage rate in the U.S. has risen to 6.36 per cent, surpassing levels recorded before the Federal Reserve began cutting rates in 2025.
The report noted that lenders are responding to rising government borrowing costs and concerns that inflation could increase again if global oil prices remain high.
In Germany, interest rates on widely used 10-year home loans have climbed to about 3.6 per cent, according to mortgage broker Dr Klein. The increase is expected to add roughly €1,000 in yearly interest payments on a €350,000 mortgage.
“Rates have risen sharply within a matter of weeks,” Florian Pfaffinger, an executive at German mortgage broker Dr Klein, said, adding that the increases had “unsettled the market.”
The United Kingdom recorded some of the steepest increases, with average rates for two-year fixed mortgages jumping to 5.1 per cent in April from 3.97 per cent at the end of February.
The growing borrowing costs are worsening affordability concerns in housing markets already struggling with limited supply and high property prices.
Earlier this month, the National Association of Realtors lowered its 2026 forecast for home sales growth to 4 per cent, down from an earlier projection of 14 per cent.
Existing home sales in March also dropped to their slowest level in nine months, despite a brief decline in mortgage rates.
Lawrence Yun, chief economist at the National Association of Realtors, previously said affordability challenges and weak consumer confidence were continuing to discourage buyers.
The Financial Times report added that economists fear ongoing tensions around the Strait of Hormuz could further raise oil prices and inflation expectations, potentially leading to additional interest rate increases.
Even with higher borrowing costs, some buyers are gradually adapting to the new rate environment after years of unusually low mortgage rates during the pandemic era.
Recent data showed purchase mortgage applications rose 4 per cent week-on-week, despite the average 30-year mortgage rate remaining above 6.3 per cent.
Analysts believe many buyers are beginning to accept that the record-low mortgage rates seen during the pandemic are unlikely to return soon.
The higher-rate climate has also encouraged more homeowners to renovate existing properties instead of moving, as many seek to hold on to cheaper mortgage deals secured in previous years.
The trend has benefited companies such as Home Depot and Lowe’s, with homeowners spending more on home upgrades rather than purchasing new properties.
Economists, including Peter Schiff, have also warned that rising property prices and mortgage rates are making homeownership increasingly difficult for younger Americans.
