Mortgage rates edged higher this week, largely driven by a midweek surge following data showing that inflation accelerated more than expected in July. Rates have since moderated back to typical levels for this period.
The average rate on a 30-year fixed mortgage increased by two basis points to 6.57% APR for the week ending Aug. 27, based on rates supplied to NerdWallet by Zillow. (One basis point equals one one-hundredth of a percentage point.) Our weekly average is calculated using daily APRs collected over the past five business days.
What’s driving mortgage rates today
Stubborn inflation raises questions about Federal Reserve action
When conflict in Iran intensified last month, speculation grew that the Federal Reserve might raise interest rates to address surging oil prices and inflation. However, the Fed opted to hold rates steady in July. Futures traders using CME Group’s FedWatch tool now place the probability of another hold in September at approximately 65%.
While the Fed does not directly set mortgage rates, it influences the overnight borrowing rate that lenders rely on to fund mortgages. Consequently, higher overnight rates typically translate to higher mortgage costs for borrowers. When the Fed maintains its current stance, lenders can often offer more competitive rates.
Even if the Fed keeps rates unchanged, mortgage rates may continue trending upward as lenders account for the declining value of the dollar. The Bureau of Economic Analysis released its Personal Consumption Expenditures Price Index on Wednesday, revealing that the Fed’s preferred inflation gauge rose 0.2%, slightly above the 0.1% forecast.
Kate on Rates: August 27, 2026
Bond market volatility reflects economic uncertainty
Beyond geopolitical tensions, artificial intelligence has emerged as another significant force reshaping the economy in recent weeks. AI systems require substantial financial resources in addition to water and energy. Tech giants like Microsoft and Oracle have been issuing massive amounts of bonds to fund the infrastructure supporting AI development. Amazon alone sold $25 billion in bonds in early July to finance its data center expansion.
This surge in corporate bond issuance created fierce competition for investor capital, causing government bond prices to drop sharply and yields to climb. Since bond prices and yields move inversely, this dynamic has significant implications for the broader economy. The 10-year Treasury yield serves as a critical economic indicator and benchmark for mortgage rates—when it rises, mortgage rates typically follow.
Strategies for securing a competitive mortgage rate
While current rates may exceed your comfort level, several strategies can help minimize the interest you pay over the life of your loan.
Consider a lower down payment with mortgage points
Conventional loans require as little as a 3% down payment. Rather than contributing more cash upfront, you might allocate those additional savings toward purchasing mortgage points. Each point costs 1% of your total loan amount and typically reduces your interest rate by 25 basis points.
For example, if you’re purchasing a $400,000 home with $20,000 available for a down payment, you could put down the minimum $12,000 (3%) and use the remaining $8,000 to buy two discount points. At this week’s average rate of 6.57%, those points would lower your rate to approximately 6.07%, with the break-even point reached after about five years of homeownership.
Monitor developments in the Iran conflict
Lenders typically respond favorably to signs of progress toward peace negotiations, as a resolution would alleviate inflationary pressures that have kept rates elevated. If a lasting agreement emerges and oil prices stabilize, mortgage rates could decline, potentially creating an opportune moment to lock in a rate.
About the author
Taylor Getler is a home and mortgages writer for NerdWallet. Her work has been featured in outlets such as MarketWatch, Yahoo Finance, MSN and Nasdaq. Taylor is enthusiastic about financial literacy and helping consumers make smart, informed choices with their money.
