Crude oil tankers, bulk carriers and vessels sit anchored around Qaboos Port June 22, 2026, in Muscat, Oman. The Strait of Hormuz, a vital shipping route for the region’s oil and gas. (Elke Scholiers/Getty Images)
(NEW YORK) — Mortgage rates have dropped to their lowest level since May as negotiations between the United States and Iran ease financial markets.
The average interest rate on a 30-year fixed mortgage stands at 6.43%, down from last week’s rate of 6.49%, Freddie Mac data on Thursday showed.
Still, mortgage rates register above their level before the war with Iran. Prior to the Middle East conflict in late February, a 30-year fixed mortgage clocked in at an average just below 6%.
“Rates did drop, which does provide some relief. But they’re still high,” Julia Fonseca, a professor at the Gies College of Business at the University of Illinois at Urbana-Champaign, told ABC News.
A decline in mortgage rates over recent weeks has come in response to a drop in oil prices and Treasury yields, some analysts told ABC News. The shift has partially reversed a trend that took hold after the Iran war broke out.
At that time, mortgage rates surged in response to a jump in U.S. Treasury yields, or the amount paid annually to a holder of government debt. The rise in bond yields is owed to fear of a renewed bout of inflation as oil prices climbed.
Since bonds pay a given investor a fixed amount each year, the specter of inflation risks higher consumer prices that would eat away at those annual payouts. In turn, bonds often become less attractive in response to economic turmoil. When demand falls, bond yields rise.
High bond yields make borrowing more expensive for average Americans, since 10-year Treasury rates influence the rates offered for a variety of loans, including mortgages.
Bond yields eased in recent weeks as negotiations unfolded between the U.S. and Iran, pushing down oil prices and softening inflation expectations, Ken Johnson, a real estate economist at the University of Mississippi, told ABC News. In turn, Johnson said, mortgage rates have fallen.
“The big driver has been the cooling of tensions in the Gulf,” Johnson told ABC News.
Despite the recent drop, mortgage rates remain higher than their pre-war level. Even more, mortgage rates stand well above their level as recently as 2022, when the average rate on a 30-year fixed mortgage came in below 5%.
Elevated mortgage rates have contributed to a phenomenon known as the “lock-in” effect.
Mortgage rates remain well above the rates enjoyed by most current homeowners, who may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage.
“Rates are still pretty high relative to what they were a few years ago, but every drop in mortgage rates helps. This is not going to go all the way toward unlocking people. We might see this gradual unlocking as time goes by and as rates tick down,” Fonseca said.
A customer shops for produce at an H-E-B grocery store on May 11, 2026 in Austin, Texas. (Brandon Bell/Getty Images)
(NEW YORK) — Inflation jumped for a third consecutive month as the Iran war continued to drive up prices in May, surpassing 4% for the first time in three years. The reading matched economists’ expectations.
Prices rose 4.2% in May compared to a year earlier, marking an increase from a year-over-year inflation rate of 3.8% in the prior month, U.S. Bureau of Labor Statistics data showed.
As recently as February, inflation clocked in just a few ticks above the Federal Reserve’s target level of 2%.
The Middle East conflict prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of global oil supply. The standoff triggered one of the largest oil shocks ever recorded.
Energy prices — a broad index that includes gasoline — soared 23% in May compared to a year earlier, data showed.
As a result, gasoline prices surged. The price of an average gallon of gas stood at $4.15 as of Wednesday, AAA data showed — an increase of $1.17 per gallon since the war began on Feb. 28. That amounts to a nearly 40% price jump in about three-and-a-half months.
The oil shortage also drove up diesel prices, putting upward pressure on grocery prices. Diesel is the lifeblood of the food supply chain, fueling trucks and ships. Higher fuel costs for suppliers mean price hikes in grocery aisles as the increased costs are passed down the supply chain.
Prices for tomatoes soared 32% in May compared to a year earlier, government data showed. Seafood prices jumped 6% over that period, while beef prices climbed nearly 13%.
A persistent increase in consumer prices may put pressure on the Fed to raise interest rates as a means of dialing back inflation.
For now, futures markets overwhelmingly expect the Fed to hold interest rates steady when policy makers meet next week, according to the CME FedWatch Tool, a measure of investor sentiment.
The meeting will be the first since Kevin Warsh began a four-year term atop the central bank.
During his term as a Fed governor in the late 2000s and early 2010s, Warsh gained a reputation as an interest-rate “hawk,” meaning he generally preferred higher interest rates as a means of ensuring low and stable inflation.
Last year, however, Warsh voiced support for lower interest rates, rebuking the Fed’s concern about inflation risk posed by a flurry of new tariffs.
At his Senate confirmation hearing in April, Warsh emphasized the threat posed by elevated inflation.
“When inflation surges — as it has done in recent years — grievous harm is done to our citizens, especially to the least well-off,” Warsh said.
Ranking member Sen. Elizabeth Warren (D-MA) delivers an opening statement during the Senate Committee on Banking, Housing, and Urban Affairs confirmation hearing for Kevin Warsh, U.S. President Donald Trump’s nominee for Chair of the Federal Reserve, in the Dirksen Senate Office Building on April 21, 2026 in Washington, DC. (Photo by Andrew Harnik/Getty Images)
(NEW YORK) — The Social Security fund will run out of money in as little as six years, a shorter time frame than previously estimated, according to a report released earlier this month by the programs’ trustees.
News of the funding cliff prompted a pair of lawmakers to reach across the aisle and propose a rescue plan in an opinion piece last week for the New York Times.
Sen. Bernie Moreno, R-Ohio, and Sen. Elizabeth Warren, D-Mass., called for lifting a cap on the amount of annual income subject to the payroll tax that funds Social Security. Currently, the cap stands at $184,500.
In other words, the plan would require individuals making more than $184,500 per year to pay taxes on the entirety of their income, potentially generating trillions in additional funds for the program over the next 10 years.
The proposal could, in theory, help administrators avoid painful solutions for recipients, such as a reduction of Social Security payments.
Legislation reflecting the proposal has not been introduced. In the New York Times, Moreno and Warren said they are “working on legislation.” Spokespeople for Moreno and Warren declined to comment on the status of the measure.
Here’s what to know about a new bipartisan proposal for safeguarding Social Security:
Is Social Security in financial trouble?
Yes, the program faces an ever-tightening budget squeeze over the next handful of years, according to a report this month from the Social Security fund’s trustees.
The Social Security trust fund will run dry in 2032, unless Congress combines the program’s old-age and disability funds, in which case insolvency would arrive in 2034, the report found. A finding last year from the program’s trustees predicted Social Security would become insolvent in 2033 or 2034.
The program generates revenue through a payroll tax paid by employees and employers, setting the income apart from the overall federal budget. Since the early 2010s, however, Social Security has paid more in benefits than it takes in through taxes, shrinking the program’s available funds, according to a study issued by the Urban Institute earlier this year.
The budget shortfall has been exacerbated by a decline in births and a reduction of immigration, resulting in fewer taxpayers at the same time that many Baby Boomers have begun receiving benefits. The One Big Beautiful Bill also removed a tax on Social Security benefits, depleting another source of the program’s revenue.
What is the Social Security reform proposal from Warren and Moreno?
The bipartisan reform proposal would tweak the payroll tax that funds Social Security.
The program is funded by a 12.4% payroll tax, which is evenly split between employers and workers. The tax, however, applies only to a maximum of $184,500 in annual income, meaning any income beyond that amount remains tax free.
The proposal put forward by Warren and Moreno would lift the cap on taxable income, allowing the tax to apply to the entirety of a person’s income even if they make more than $184,500 per year.
“Since the vast majority of Americans make less than that, most people are paying Social Security taxes on 100 percent of their earnings while the highest earners are paying on only part of theirs,” Warren and Moreno said in a co-authored opinion piece in the New York Times.
The elimination of the cap on taxable income would generate about $3.4 trillion in added revenue over the next decade, according to an analysis from the non-partisan Peterson Institute. The policy change would close more than half of the program’s funding gap, the group said.
“With rising prices and artificial intelligence causing economic uncertainty for the future, Social Security must remain a stable foundation to help retirees afford life’s basic necessities,” Warren and Moreno said.
The proposal drew opposition from at least one conservative lawmaker. Sen. Jon Husted, R-Ohio, faulted the plan for what he described as a “giant tax increase.”
“We need to secure social security, we need to protect it, we need to make it stronger,” Husted told “The Guy Benson Show” last week. “But I’m not on board with the approach that they’ve outlined.”
What are some alternative reforms for funding Social Security?
As the program’s budget woes have deepened in recent years, elected officials and researchers have proposed a range of solutions. As with any financial shortfall, the fixes either increase revenue or slash expenses.
An alternate means of increasing tax revenue for the program involves ratcheting up the payroll tax by one percentage point from 12.4% to 13.4%, the Peterson Institute said. That move would generate $601 billion in additional revenue over 10 years, closing about a quarter of the program’s funding gap, the group added.
If Congress fails to address the projected budget shortfalls, automatic cuts will dial back Social Security benefits by about 25% in 2032, the Social Security fund’s trustees said earlier this month.
Earlier this month, a bipartisan bill introduced in the House proposed establishing an independent commission composed of 13 members appointed by leaders in Congress and the president. The commission would seek out fixes for the long-term sustainability of the program. The bill, which counts three cosponsors, has been appointed to two House committees for consideration.
As the years pass, the task of reforming Social Security becomes a greater and greater challenge, the Urban Institute said.
“Waiting only makes the changes larger and more difficult,” the group added.
Melting street thermometer against bright summer sun.High temperature.Summer heat. (Dmitriy83/Getty Images)
(NEW YORK) — A heat wave blanketed a vast swathe of the United States over the 4th of July weekend, threatening the health of tens of millions of people and the power supply for thousands of homes.
A lesser-known risk of extreme heat, meanwhile, may hammer pocketbooks.
Heat waves threaten an array of costs for the economy, sapping the productivity of outdoor workers, shutting some shoppers inside their homes and driving up utility payments, some analysts told ABC News. All in all, they added, those effects could shrink output and hike some costs in areas impacted by heat waves.
“Extreme heat has economic consequences,” Justin Mankin, a professor of geography at Dartmouth University, told ABC News. “The consequences seem to be negative just about everywhere.”
Heat waves are becoming more frequent, more intense and longer lasting due to human-amplified climate change, according to the federal government’s Fifth National Climate Assessment. The average number of heat waves in major U.S. cities each year has doubled since the 1980s, that report said.
Extreme heat is considered the deadliest weather-related hazard in the U.S., according to the National Weather Service. About 2,000 Americans die each year on average from extreme heat, the Centers for Disease Control and Prevention noted.
A body of research indicates that heat waves also risk damage for the economy.
A study issued last year by researchers at the University of Florida, the European Stability Mechanism and the International Monetary Fund — which examined 203 countries over a 40-year period — found that an increased frequency of high temperatures and harsh droughts resulted in a 0.2% decline in gross domestic product (GDP).
Another report found total heat-related economic losses in the trillions of dollars. Taken together, economic damage from human-caused extreme heat likely cost as much as $50 trillion worldwide over a recent 30-year period, according to a 2022 study from Dartmouth University researchers.
“These things are costly and they’re getting worse because of climate change,” said Mankin, a co-author of the study.
The reasons for the economic impact range from diminished employee productivity to heightened utility costs to lost agricultural output, some analysts said.
Berkay Akyapi, a professor of business at the University of Florida and a co-author of the study on lost GDP, pointed to the crop damage caused by a heightened number of heat waves.
Nighttime temperature spikes are especially damaging, Akyapi said, since they deny crops a respite during a time period typically reserved for cooler temperatures. Fewer crops, in turn, threaten to elevate prices as the same number of dollars chase after a smaller supply of goods, he added.
A decline in domestic crop output can also force a given country to increase imports, putting further upward pressure on prices, Akyapi noted.
“If you can’t produce something, you have to import it and that of course raises prices,” he said.
Heat waves also cause higher prices for utilities as demand grows for air conditioning and other power-driven solutions, some analysts said.
The budget woes, in turn, cause a chain reaction, squeezing funds left over for other products and sapping consumer-driven economic activity. Steven Brown, a director of insights and evidence at the Aspen Institute Financial Security Program, told ABC News.
“It results in higher bills for households that are already financially tight or strained,” Brown said. “It causes a spillover in their ability to pay for other things like groceries or rent.”
In 2023, a report issued by a U.S. Senate committee found the negative economic effects from extreme heat are most pronounced in heat-exposed sectors such as agriculture, mining, construction, manufacturing and transportation. The risk owes primarily to lost productivity among workers in such industries, the report said.
“Together, the loss of productivity caused by heat is emerging as one of the biggest economic costs of climate change,” the report added.
To be sure, analysts noted that some cold-weather locations may benefit from heat waves, since higher-than-normal temperatures could improve agricultural output or allow for increased time spent outdoors.
“When you look around the world at places like Canada, Sweden or Norway — they can benefit. Heat waves are kind of good weather there,” Akyapi said.
Adaptive efforts, such as installation of air conditioning, can mitigate some of the negative economic effects, some analysts noted. Some governments are also exploring administrative solutions meant to help fight extreme heat.
Arizona appointed Eugene Livar as its first chief heat officer in 2024, tasking him with oversight of the state’s extreme heat preparedness plan. Democratic lawmakers in Arizona and Nevada introduced a bill in Congress last year that would add extreme heat to the Federal Emergency Management Agency’s list of major disaster qualifying events, unlocking access to federal support.
“Government interventions probably reduce some of the costs associated with these events, despite being costly interventions themselves,” Akyapi said.
Dartmouth’s Mankin said he expects heat waves to remain a feature of everyday life for the foreseeable future as human-caused climate change continues.
“These kinds of heat events are just going to be more commonplace. You’ll just have more days of the year that look like this, particularly when each subsequent year is hotter than the last,” Mankin said.
ABC News’ Kenton Gewecke and Emily Shapiro contributed to this report.
