Mortgage rates eased slightly this morning following a temporary reduction in inflation-related concerns. Yesterday, President Trump indicated the U.S. would refrain from attacking Iran before the midterm elections. This development led bond yields to stabilize, potentially as markets anticipate a short-term decline in oil prices amid hopes for continued regional stability.
The average interest rate on a 30-year fixed-rate mortgage decreased to 7.37% APR today, according to data provided to NerdWallet by Zillow. This marks a reduction of 10 basis points from yesterday’s rate but remains 6 basis points higher compared to a week ago. A basis point equates to one one-hundredth of a percentage point.
What influences mortgage rates?
Mortgage rates fluctuate continuously due to their dependence on market reactions to economic indicators, job reports, Federal Reserve policy decisions, and global events. Even minor shifts in bond markets can impact mortgage pricing. For instance, the ongoing Iran conflict has intensified inflationary pressures by disrupting key shipping routes and oil production, indirectly affecting the cost of goods and services.
This inflationary environment weakens bond prices, causing the 10-year Treasury note yield— which benchmarks 30-year fixed-rate mortgages— to rise. Additionally, long-term inflation above the Federal Reserve’s 2% target since 2021 has prompted the central bank to adopt an aggressive rate-hiking strategy.
The Fed’s primary tool for curbing inflation is raising the federal funds rate. While this rate does not directly set mortgage rates, changes ripple through the economy. Markets now appear less likely to see a funds rate increase at the upcoming meeting, with the September Consumer Price Index (CPI) report offering further insights into inflation trends next week.
August’s Personal Consumption Expenditures Price Index (PCE), released Sept. 30, showed a decline below expectations. A similarly soft September CPI could reinforce the case for maintaining current interest rates. However, a hotter CPI report might offset August’s PCE data, which was influenced by revised measurement methodologies likely suppressing inflation figures.
Despite these developments, mortgage rates are expected to remain above 7% until more conclusive economic shifts occur, such as a definitive end to the Iran conflict.
Kate on Rates
For homeowners and buyers, today’s mortgage rates should guide budgeting decisions. While rate dips may offer temporary advantages, they are not guarantees. Refinancing could be considered if current rates are at least 0.5 to 0.75 percentage points below existing loan rates, provided borrowers remain in their properties long enough to offset closing costs.
With rates hovering near 7%, few current borrowers qualify for refinancing opportunities. Those considering a cash-out refinance versus traditional options should evaluate their financial goals, such as lowering monthly payments or accessing equity.
Should I start shopping for a home?
There is no ideal timing for home buying; the decision hinges on affordability at current rates. Buyers should prioritize preapproval, lender comparisons, and budget alignment rather than speculating on future rate drops. Strengthening financial profiles through debt reduction and increased savings can improve loan terms when ready to purchase.
Should I lock my rate?
Rate locks provide protection against market volatility during loan processing. Lenders offering float-down options allow borrowers to benefit from improved rates if they decrease during the lock period.
Why is the rate I saw online different from the quote I got?
Online rates are illustrative examples for idealized borrowers with high credit scores and substantial down payments. Personalized quotes depend on factors including location, property type, and individual financial profiles.
About the author
Kate Wood is a lending expert and certified financial health counselor (CHFC) with over a decade of experience in mortgage and financial education. She focuses on equitable access to homeownership and demystifying government programs. Prior to NerdWallet, she contributed to This Old House’s coverage of home improvement topics.
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