Mortgage Rates Edge Lower as Federal Reserve Hike Odds Recede

Mortgage rates fell slightly this morning, likely in response to Friday’s weaker-than-expected jobs report. Coupled with last Wednesday’s more reassuring inflation data, the information reduces the chance that the Federal Reserve will raise rates at its meeting later this month.

The average interest rate on a 30-year, fixed-rate mortgage dropped to 7.31% APR, according to rates provided to NerdWallet by Zillow. That is 10 basis points lower than Friday but 6 basis points higher than a week ago. A basis point is one one-hundredth of a percentage point.

Although rates are lower today, the move is modest because mortgage rates have climbed significantly in recent weeks. The section below outlines the major forces driving mortgage pricing and how Federal Reserve policy fits into the broader picture.

Average mortgage rates over the past 30 days

Kate on Rates: October 1, 2026

What influences mortgage rates?

Mortgage rates change constantly because pricing reacts to new inflation reports, employment data, Federal Reserve meetings, and global developments. Even small shifts in the bond market can affect mortgage pricing.

Lately, mortgage rates have remained steadily above 7%. Mortgage interest rates generally track the yield on the 10-year Treasury note, which reflects the return investors require for lending money to the U.S. government. Last week, that yield reached its highest level since spring 2002.

Broader forces shaking up the bond market, such as increased U.S. government borrowing and major technology companies’ spending on artificial intelligence and data centers, are unlikely to disappear quickly. At the same time, the war in Iran continues to strain global oil supplies and sustain inflation pressure. All of these factors have contributed to higher mortgage rates.

When assessing where rates may move next, market participants often watch the Federal Reserve. Although the Fed does not set mortgage rates directly, its policy can shape market expectations. Changes in the federal funds rate, the overnight benchmark interest rate, tend to spread across other borrowing costs, including mortgages.

At its September meeting, the Federal Reserve raised its benchmark rate by 25 basis points, the first increase since July 2023. The goal is to fight inflation by making borrowing more expensive and discouraging consumer spending and business expansion.

The Fed has two more meetings in 2026, and based on bankers’ anonymous forecasts last month, at least one additional rate hike remains possible. The timing is still uncertain. A week ago, the odds of a hike at the Fed’s October meeting were about 70%. Today, they are roughly 21%.

The shift came after August inflation data came in slightly better than expected and September employment numbers missed forecasts. When the labor market weakens, the Federal Reserve is more inclined to support hiring rather than tighten policy.

The challenge is that lower interest rates can stimulate employment, but they can also encourage borrowing and spending, which may push inflation higher. Conversely, raising rates can help contain inflation but can also slow the labor market. Policymakers must balance cooling price growth with keeping the labor market healthy.

For now, the Fed appears likely to hold steady at this month’s meeting. That removes some upward pressure on mortgage rates, but a dramatic decline should not be expected because the larger forces pushing up long-term borrowing costs are not likely to ease immediately.

Buyers shopping for a home should build their budgets around today’s higher rates and treat any dip as a welcome bonus rather than a guarantee. Borrowers considering refinancing may need patience.

Refinancing may make sense if today’s rates are at least 0.5 to 0.75 percentage points lower than your current rate and you plan to stay in the home long enough to offset closing costs. With current pricing, a refinance may be worth considering if your current rate is around 7.81% or higher.

It is also useful to consider your goals: lowering your monthly payment, shortening your loan term, or accessing equity. For example, a cash-out refinance may be preferable to keeping the original mortgage and adding a home equity loan or HELOC if total costs are lower. A refinance calculator can help estimate savings and understand how long it would take to break even on refinancing costs.

Should I start shopping for a home?

There is no universal right time to start shopping. What matters most is whether you can comfortably afford a mortgage now at today’s rates.

If the answer is yes, avoid becoming overly focused on whether lower rates may appear later; you can refinance down the road. Focus on getting preapproved, comparing lender offers, and understanding a monthly payment that fits your budget.

An affordability calculator can help estimate your potential monthly payment. If a new home is not in the cards right now, there are still productive steps you can take. Use this time to pay down existing debts and build your down payment savings. That can improve cash flow and may help you qualify for a better rate when you are ready to buy.

Should I lock my rate?

If you already have a quote you are happy with, consider locking your mortgage rate, especially if your lender offers a float-down option. A float-down lets you take advantage of a better rate if the market drops during the lock period.

Rate locks protect you from increases while your loan is processed, and that stability can be valuable in a market that continues to move.

Rates can change daily and even hourly. If you are satisfied with the terms you have, it is reasonable to commit.

Why is the rate I saw online different from the quote I got?

The rate you see advertised is a sample rate, usually based on a borrower with excellent credit, a large down payment, and mortgage points. That may not match every buyer’s circumstances.

In addition to market factors outside your control, your personalized quote depends on your credit profile, loan amount, down payment, debt-to-income ratio, loan term, and other underwriting details.

Even two borrowers with similar credit scores can receive different rates if their overall financial profiles differ.

If I apply now, can I get the rate I saw today?

Maybe, but even personalized rate quotes can change until you lock. Lenders adjust pricing multiple times a day in response to market changes.

About the author

Kate Wood is a lending expert and certified financial health counselor who joined NerdWallet in 2019. She writes about mortgage, credit, and consumer-finance topics, with a focus on making government programs and homeownership issues easier to understand.

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