US faces fresh cost crunch as mortgage rates hit 7%, oil tops $107 and gas prices surge
&imwidth=600&imheight=450&format=webp&quality=medium "US faces fresh cost crunch as mortgage rates hit 7%, oil tops $107 and gas prices surge")
US faces fresh cost crunch as mortgage rates hit 7%, oil tops $107 and gas prices surge Photograph: (AI-generated image)
US faces a fresh cost squeeze as mortgage rates top 7%, Brent crude surges above $107 and natural gas prices jump amid energy disruptions
The US economy is facing renewed pressure from rising housing and energy costs, with mortgage rates climbing above 7 per cent as oil prices surged past $107 a barrel following fresh attacks linked to the Iran war. The average 30-year fixed mortgage rate, the most common home loan in the United States, rose to 7.03 per cent this week, up from 6.3 per cent a year ago, according to Freddie Mac. The rate crossed the 7 per cent threshold for the first time since January 2025, adding another hurdle for prospective homebuyers.
Mortgage rates had fallen below 6 per cent in late February, raising hopes that the US housing market could begin recovering from its prolonged slowdown. But rates subsequently moved higher after the United States and Israel launched attacks on Iran on February 28. The increase has come as Americans are also dealing with elevated energy costs and broader economic uncertainty linked to the war in the Middle East. Since the conflict began, disruptions to oil shipments through the Persian Gulf have pushed up the cost of gasoline, diesel and heating oil.
Economists have warned that sustained energy-price increases could eventually feed into prices across the wider US economy.
The pressure is also visible in the bond market, which plays a key role in determining mortgage rates. The 10-year US Treasury yield has moved above 5 per cent, increasing borrowing costs for consumers and businesses. Inflation remains elevated as well. Consumer prices rose at an annual rate of 3.4 per cent in August, adding to concerns over how much longer interest rates will need to remain restrictive.
Higher borrowing costs are already weighing on the housing market. Existing-home sales fell 2 percent in August from July, reaching their lowest level since June last year. At the same time, home prices continued to rise, increasing 1.5 percent annually in June, according to Cotality. The current housing environment is a sharp contrast to the pandemic-era boom. Mortgage rates fell as low as 2.65 percent in January 2021, triggering a wave of home buying, bidding wars and rapid price increases. As rates subsequently climbed, homeowners increasingly became reluctant to sell and give up historically low mortgage rates.
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Oil prices surge above $107
The housing pressure comes as energy markets face another bout of volatility. Brent crude traded near $107 a barrel on Thursday, after earlier climbing above $108, as fresh attacks by Iran-aligned Houthi militants in Yemen against Saudi Arabia raised concerns about further disruption to oil supplies. US West Texas Intermediate crude also moved back above $95 a barrel.
Saudi Arabia said it intercepted six ballistic missiles fired by the Houthis toward areas including Taif and the Yanbu region. Yanbu is home to a major oil export terminal on Saudi Arabia's Red Sea coast. Oil prices had initially eased earlier in the week on reports that Washington and Tehran could be exploring a diplomatic path to restore exports through the Persian Gulf. But renewed attacks and uncertainty surrounding the talks quickly pushed prices higher.
The Strait of Hormuz remains central to the supply outlook. Saudi Arabia has been seeking alternative routes for exports, but those routes have also faced higher war-risk insurance costs. Only 10 commodity vessels crossed the Strait of Hormuz on Wednesday, below the 10-day moving average of 17, according to the information provided.
Natural gas adds to energy pressure
US natural gas prices have also moved sharply higher, adding another layer to the energy squeeze. Natural gas prices surged more than 6 percent following a pipeline-related disruption, taking prices roughly 28 per cent above their April 2026 low. The move comes at a sensitive time for energy markets, with investors already watching the impact of the Middle East conflict on global fuel supplies. Natural gas is particularly important for the US power sector, heating demand and industrial users.
