Mortgage rates decreased slightly this morning as concerns about inflation eased. President Trump’s announcement that the U.S. would not attack Iran before the midterm elections helped calm bond yields, with hopes that a period of peace could lead to lower oil prices.
The average interest rate on a 30-year fixed-rate mortgage dropped to 7.37% APR today, according to rates provided by Zillow to BW. This is 10 basis points lower than yesterday but six basis points higher than a week ago. For more specific details, refer to the chart below. A basis point is one one-hundredth of a percentage point.
For more information on why inflation is a significant factor for mortgage rates, continue reading below the graph.
Reminder: Markets are closed on weekends, so the rates you see on Friday are unlikely to change significantly until Monday.
Average mortgage rates, last 30 days
🤓 Kate on Rates
📈 What influences mortgage rates?
Mortgage rates are constantly changing, as they are influenced by factors such as inflation reports, job numbers, Fed meetings, and global events. Even small changes in the bond market can impact mortgage rates.
Inflation has been a major driver of increasing mortgage rates during the Iran conflict. The conflict’s impact on shipping routes and oil production indirectly affects the prices of various goods.
High inflation rates are unfavorable for bond prices, and as 30-year fixed-rate mortgage interest rates are tied to the yield on the 10-year Treasury note, they also rise. The bond market plays a crucial role in determining mortgage rates.
The Federal Reserve faces challenges with persistent inflation, as maintaining price stability is part of its dual mandate. With inflation exacerbated by the Iran conflict, the Fed has shifted towards increasing interest rates.
While the Fed does not directly set mortgage rates, changes in the federal funds rate, which the Fed controls, have ripple effects throughout the economy. Expectations of a rate hike from the Fed can lead to higher mortgage rates.
Despite speculation about a potential rate hike, recent indications suggest that the Fed may hold off on raising rates at its upcoming meeting. The release of September’s Consumer Price Index (CPI) will provide further insights into inflation trends.
Whether the Fed decides to hike rates or not, mortgage rates are likely to remain above 7% for now. Significant changes, such as a resolution to the Iran conflict, would be required for a substantial drop in rates.
When considering home purchases at the current time, it is advisable to base your budget on current mortgage rates. Any decrease in rates should be viewed as a bonus rather than a guarantee. For those looking to refinance, patience is key.
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