The average U.S. 30-year fixed mortgage rate has climbed to 7.03%, its highest level in 20 months, as higher fuel prices, Treasury yields and renewed inflation concerns weigh on financial markets. Freddie Mac data released Thursday showed rates had risen more than a percentage point since the Iran war began in late February, with the last reading above 7% recorded in January 2025. A one-percentage-point increase can add thousands or tens of thousands of dollars to annual borrowing costs, depending on a home's price. Mortgage rates have moved alongside oil prices and Treasury yields, which are closely linked to mortgage pricing. A key Treasury rate reached its highest level in nearly two decades on Wednesday, days after the Federal Reserve (U.S. central bank) raised benchmark borrowing costs. The conflict has produced a historic oil shock, pushing up energy prices and other costs, including groceries. Investors have become less willing to hold long-term bonds as persistent inflation threatens to reduce the real value of their fixed payments, driving yields higher as buyers demand larger annual returns. Markets are also anticipating another Federal Reserve rate increase next month. The combination of elevated prices and mortgage rates has made homes unaffordable for many buyers, while uncertainty surrounding the Iran war, consumer prices and future borrowing costs has caused some prospective purchasers to delay decisions. High rates have also strengthened the mortgage lock-in effect (owners delaying moves to keep cheaper loans), as homeowners with lower existing rates may avoid selling and taking on more expensive mortgages. Consumer prices rose 3.4% annually in August, more than one percentage point above the Federal Reserve's 2% target, while the average U.S. gasoline price reached $4.48 per gallon, up 50% since the war began. The Federal Reserve raised rates last week to address a months-long inflation surge, marking its first increase since July 2023. Fed Chair Kevin Warsh said, "The plain fact is that inflation is too high and has been for too long." Higher rates are intended to slow demand, but they also increase costs for car loans, credit cards and mortgages, potentially restraining large purchases and business expansion.