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Mortgage rates moved lower today as the headlines coming out of the Middle East have been, on balance, positive. The ceasefire between Lebanon and Israel has been extended by three weeks, and it looks likely that a second round of negotiations between the U.S. and Iran will happen.
The average interest rate on a 30-year, fixed-rate mortgage dropped to 6.00% APR, according to rates provided to BW by Zillow. This is 10 basis points lower than yesterday and 18 basis points lower than a week ago. (See our chart below for more specifics.) A basis point is one one-hundredth of a percentage point.
If you’re wondering why the latest in the Iran war matters for mortgage rates, keep reading below the chart for the details.
P.S.: While the economy never sleeps, markets are closed on the weekends. (We are, too.) The rates you see Friday are unlikely to change much, if at all, until Monday.
Average mortgage rates, last 30 days
📉 When will mortgage rates drop?
Mortgage rates track the bond market, specifically, the yield (basically, the interest rate) on 10-year Treasury notes. Here’s the super short version:
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Lenders sell mortgages on the secondary market where the loans are pooled and packaged into mortgage-backed securities (MBS), which are investments that pay a fixed rate of return.
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MBS attract similar investors to bonds like Treasuries, which also pay a fixed rate of return. Thanks to refinancing and home sales, 10 years is a safe overall lifespan estimate for mortgages, hence the benchmark to the 10Y T-note. Because mortgages are a little riskier, MBS will always have a slightly higher return than 10-year Treasuries.
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Mortgage rates are determined by lenders adding a set amount — the “spread” — to the yield, or return on, a 10Y T-note. The spread covers the lenders’ costs as well as the risk premium investors will demand.
I know, I know, the short version wasn’t that short. But I tried. The main thing to know is that mortgage rates follow the yield on the 10YT.
Inflation kinda ruins bonds’ safe harbor status because if money’s worth less, so are bonds’ returns — that set payout doesn’t go as far. Less demand for bonds means their prices fall, and as bonds’ prices drop, their yields rise relative to those price tags. That’s essentially why we saw mortgage rates rise so quickly in March.
Refinancing might make sense if today’s rates are at least 0.5 to 0.75 of a percentage point lower than your current rate (and if you plan to stay in your home long enough to break even on closing costs).
With rates where they are right now, you could start considering a refi if your current rate is around 6.50% or higher.
If you’re interested in securing a lower mortgage rate, BW’s refinance calculator can help you estimate potential savings and determine how long it would take to recoup the costs of refinancing.
Deciding when to start shopping for a home is a personal choice, but it’s essential to ensure that you can comfortably afford a mortgage at current rates. Don’t get too caught up in waiting for lower rates in the future, as you can always refinance later on. Focus on getting preapproved, comparing offers from different lenders, and figuring out a monthly payment that fits your budget.
BW’s affordability calculator is a useful tool for estimating your monthly payment. If buying a new home isn’t feasible right now, consider paying down existing debts and saving for a down payment. This not only improves your financial standing for a future mortgage but can also help you secure a better interest rate when you’re ready to buy.
When you have a mortgage rate quote that you’re satisfied with, it may be wise to lock it in, especially if your lender offers a float-down option. Rate locks protect you from potential rate increases during the loan processing period, providing peace of mind amidst market fluctuations.
It’s important to note that advertised rates are typically sample rates based on ideal borrower scenarios, so your personalized quote will vary based on factors like credit score, down payment, and financial profile. Rates can change until you lock them in, as lenders adjust pricing multiple times a day in response to market shifts.
Overall, the decision to apply for a mortgage should be based on your current financial situation and market conditions. Keep in mind that even personalized rate quotes can change until you finalize the loan. Plan accordingly and stay informed throughout the process.
About the author: Kate Wood is a lending expert and certified financial health counselor (CHFC) at BW. With a background in sociology, Kate is passionate about addressing issues like homeownership inequality and higher education accessibility. Prior to joining BW, she specialized in writing about home remodeling, decor, and maintenance for This Old House.