Higher mortgage rates erase home affordability gains after geopolitical shock

Higher monthly payments reduce the number of households that can afford to buy a home. That shift is now underway as mortgage rates rose sharply following U.S. military action in Iran, reversing recent affordability gains just as the spring buying season begins. The spike in rates was driven by investor flight to safe assets and bond market volatility, which directly pushed up borrowing costs for home loans. For a typical buyer financing a $400,000 mortgage, a quarter-point increase in rates adds over $60 to each monthly payment—a threshold that prices some buyers out of the market entirely. As a result, the National Association of Realtors will revise its projected 14 percent home sales increase downward. The new forecast will reflect the dampening effect of higher borrowing costs on buyer demand, marking a pivot from earlier optimism to a more constrained outlook.