Mortgage rates declined this week, a trend driven more by markets’ response to the U.S. and Iran reaching an agreement to reopen the Strait of Hormuz and the likelihood of a broader cease‑fire than by the Federal Reserve’s decision to keep the federal funds rate unchanged.
Although the Fed’s current stance may not directly alter mortgage numbers, its outlook is increasingly influential. The central bank sets only the federal funds rate—a short‑term benchmark that ripples through the wider borrowing environment, ultimately shaping mortgage costs.
The average 30‑year fixed‑rate mortgage fell seven basis points to 6.32% APR in the week ending June 17, according to rates provided to NerdWallet by Zillow. Daily APRs over the past five business days are averaged to produce this weekly benchmark.
Mortgage lenders often factor in anticipated Fed actions even before official announcements, meaning the market’s expectations for future moves can have a more pronounced impact on rates than the current meeting itself.
Why Rate Cuts Are Unlikely
President Trump has consistently pushed for lower rates since the start of his second term, hoping his chosen Fed chair, Kevin Warsh, would deliver. However, the chair’s authority is shared among the 12 Federal Open Market Committee members; Warsh’s influence is limited to a single vote.
Inflation remains above the Fed’s 2% goal, a situation exacerbated by the conflict in Iran. Despite concerns that the war could dampen hiring, employment data have shown resilience, reducing the case for a policy easing.
The Fed typically cuts rates to bolster a weak labor market, and raises them to curb inflation. With inflation still high and jobs firming, the balance of risks currently tilts away from a cut.
Senior Economist Elizabeth Renter notes, “Inflation is high and the labor market steady. While a rate hike may seem unnecessary this week, it remains a possibility later in the year.”
Should consensus grow among Fed watchers that a hike is imminent, mortgage rates would likely rise. Conversely, a potential end to the Iranian conflict might encourage the Fed to maintain its stance, hoping inflation will ease organically.
A Less Transparent Central Bank?
Kevin Warsh’s inaugural press conference as chair may signal a shift toward fewer public statements. He has expressed concern that overt Fed forecasts could slow policy responsiveness.
Nonetheless, forward guidance remains essential. As Renter explains, “When the Fed telegraphs intentions, markets can adjust proactively, reducing volatility and aiding businesses and consumers in planning.”
Clear signals are particularly vital for significant decisions like purchasing or selling a home, where expectations about future rates shape timing and market activity.
About the author
Kate Wood is a lending expert and certified financial health counselor (CHFC) who joined NerdWallet in 2019. With an educational background in sociology, Kate focuses on issues such as homeownership inequality and higher education, and enjoys clarifying government programs. She previously wrote on home remodeling, decor, and maintenance for This Old House.
