Mortgage rates recede slightly. Is there more to come as Iran conflict ends?

For months, the military conflict between the U.S. and Iran has weighed on mortgage rates as oil supply shocks and rising inflation have kept investors on edge. But with the two countries set to sign an end to hostilities on Friday in Switzerland, housing professionals and their clients can expect the costs of a home loan to stabilize.

Rates dropped slightly in the two days since President Donald Trump’s confirmation of a deal. On Tuesday, HousingWire’s Mortgage Rates Center showed that 30-year conforming rates averaged 6.73%, down 5 basis points from one week ago. Rates for 30-year jumbo loans were down 2 bps to 6.75%, while 30-year loans backed by the Federal Housing Administration (FHA) also shed 2 bps to average 6.31%.  

Fed will ‘absolutely’ hold rates

While the macroeconomic picture should improve as the Strait of Hormuz reopens and oil prices come down, inflation is now at a 4.2% annual clip, which likely ended any slim hopes of the Federal Reserve lowering benchmark rates this week.

The Fed will conclude its two-day meeting on Wednesday — its first under the leadership of Kevin Warsh — but the federal funds rate is all but certain to remain at a range of 3.5% to 3.75%. Moving forward, a rate hike could be more likely than cut. According to the CME Group’s FedWatch tool, 9% of interest rate traders expect a 25-bps increase in July and 26% anticipate one by September.

“The Fed is absolutely going to hold rates [this week],” said Melissa Cohn, regional vice president of William Raveis Mortgage. “Even though Warsh is more dovish, he’s one of 12 voting members of the Fed’s Board of Governors, and he’s going to have a hard time getting a majority of them to agree to cut rates in this current inflationary environment.”

“Mortgage rates are likely to remain stable or uptick slightly at the next June Fed meeting, as the market points toward short-term rates holding steady,” said Charles Goodwin, vice president and head of bridge and DSCR lending at Kiavi.

“The latest first Friday jobs report indicated better-than-expected economic performance that suggests a reduced likelihood of a near-term Fed rate cut and sustained higher interest rates, adding 172,000 jobs in May while the unemployment rate held steady at 4.3% — effectively sealing the fate of no Fed rate cut in June.”

Odeta Kushi, deputy chief economist at First American, noted that expectations today have shifted significantly since the start of the year, when markets believed the Fed would begin cutting rates by this point. But with headline inflation running at its highest level since 2023, “markets have largely abandoned the idea that easing is the default path,” she said.

“The conversation has shifted from ‘when will they cut?’ to ‘will they cut at all?’” Kushi added.

Housing market activity stays resilient

This week’s Housing Market Tracker shows that homeownership demand continues to grow even as fewer properties are being listed for sale. HousingWire Lead Analyst Logan Mohtashami wrote Saturday that weekly pending sales increased to 75,856, up from 72,039 during the same week in 2025.

Mortgage Bankers Association (MBA) data for the week ending June 5 also showed that consumers are hungry to purchase a home as total applications were up 10.8% from the prior week. The higher demand coincides with an increase in mortgage credit availability, with jumbo loan programs driving a slight uptick in the MBA’s index from April to May.

“Mortgage applications increased for the first time in four weeks, jumping 10% overall with sizeable upticks in both purchase and refinance activity. The rise in purchase applications points to continued homebuyer demand despite affordability challenges and broader economic uncertainty,” said Bob Broeksmit, the MBA’s president and CEO.

Kyle Bass, production business manager at Refi.com — a subsidiary of Mortgage Resource Center and Veterans United Home Loans — said that recent stability in rates has benefited refinance origination opportunities as prospective borrowers “may be settling into the current rate environment rather than waiting for a meaningful decline.”

Kushi also expressed optimism for the purchase market as existing home sales recorded their largest monthly gain of the year in May.

“The most important thing to understand about today’s housing market is that demand has been delayed, not destroyed,” she said. “We estimate there are roughly 4 million missing home sales relative to historical norms, highlighting the amount of pent-up demand still waiting on the sidelines.

“For homebuyers, the question is no longer simply whether rates move lower. It’s whether households gain enough confidence in the path of inflation, borrowing costs and the broader economy to move forward with major financial decisions.”