Oil-linked inflation lifts US 30-year mortgage to 6.65%

The Mortgage Bankers Association reported the average rate on the 30-year fixed mortgage rose 9 basis points to 6.65% in the week ended May 22, the highest reading since August 2025 before the Federal Reserve began cutting rates.

Markets reacted to higher oil prices tied to tensions around Iran, which raised inflation worries and pushed up U.S. Treasury yields. Mortgage rates tend to follow the 10-year Treasury yield more closely than the Fed’s short-term policy rate.

Consumer prices increased 3.8% in April from a year earlier, up from 2.9% in August. The unemployment rate remained at 4.3%, the same level recorded last August.

The MBA said overall mortgage application volume fell 8.5% from the prior week, with a large drop in refinancing requests. Higher borrowing costs reduced refinancing activity and raised estimated monthly payments for prospective buyers.

Kevin Warsh was sworn in as chair of the Federal Reserve this week, succeeding Jerome Powell. Following the swearing-in, former President Donald Trump predicted rates would decline. Market pricing has shifted toward a possibility that the Fed could raise rates later in the year if inflation remains persistent, and several Fed officials have signaled they may need to consider higher policy rates rather than further cuts.

U.S. government bond yields eased in recent days after reports of potential progress toward reopening the Strait of Hormuz, which reduced some near-term concerns about global oil supply. Investors are monitoring oil prices, monthly inflation readings and Fed guidance for indications of where long-term borrowing costs will move next.

The combination of higher mortgage rates and lower application volume affected both homebuyers and homeowners weighing refinancing options.