Close Menu
Tuesday, May 12
Personal Finance

Mortgage Rates Today, Friday, May 8: A Little Higher

No Comments7 Mins Read

SOME CARD INFO MAY BE OUTDATED

This page includes information about these cards, currently unavailable on BW. The information has been collected by BW and has not been provided or reviewed by the card issuer.

Yesterday, markets rejoiced at the prospect of an end to the war in Iran. Today… not so much. Reports of the U.S. and Iran exchanging attacks despite a ceasefire have tempered hopes for an imminent resolution.

The average interest rate on a 30-year, fixed-rate mortgage rose to 6.22% APR, according to rates provided to BW by Zillow. This is seven basis points higher than yesterday but seven 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.

It’s not a massive rise, but it reflects markets’ take on the evolving situation overseas. For more on how what’s going on in the Middle East and at home has been affecting mortgage rates, keep reading below the chart.

One more thing — while the economy never sleeps, markets are closed on the weekends. 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 are constantly changing, since a major part of how rates are set depends on reactions to new inflation reports, job numbers, Fed meetings, global news … you name it. For example, even tiny changes in the bond market can shift mortgage pricing.

Here’s what’s motivating today’s mortgage rates.

The Iran war has been a primary driver for mortgage rates as investors react to geopolitical uncertainty. From day one of the war, there have been concerns about rising fuel prices due to Iran’s strategic importance both as an oil producer and geographically, bordering the critical Strait of Hormuz. The global oil supply is getting throttled, raising energy prices and contributing to inflation.

While the stock market’s been doing great, those inflation fears have been shaking up the bond market. Bonds offer investors a set return known as the yield. Less demand for bonds pushes their prices down, which pushes up bonds’ yields — relative to the bond’s price, that preset yield is now higher.

Here’s where it’ll hopefully start to make sense. Mortgage rates are benchmarked to one specific bond, the 10-year Treasury note. The yield on the 10Y T rose sharply throughout March and only eased up a bit in April, and we’ve likewise seen the average 30-year fixed rate mortgage APR remain firmly above 6%.

Lately, markets have been showing some fatigue when it comes to reacting to news coming out of the Middle East. Early on in the conflict, it felt like every update was a market mover. Now, it takes Big News (yes, with caps) to shake things up. That’s brought us somewhat more stable mortgage rates, even if they’re higher than one might like.

The U.S. putting forth a concrete proposal for ending the war certainly counted as Big News, and markets reacted favorably. But we aren’t out of the woods yet. Iran’s still trying to assert its right to control the Strait of Hormuz, and President Trump has made clear that military strikes remain an option should an agreement fail to be reached.

Influences on the home front

There’s also plenty going on at home that’s got the potential to move mortgage rates.

At its meeting last week, the Federal Reserve kept its benchmark interest rate the same, marking the third consecutive meeting with no change. The Fed doesn’t set mortgage rates, but its level of influence over U.S. markets means that mortgage rates’ moves often anticipate the Fed’s actions.

The Fed controls a key short-term borrowing rate called the federal funds rate, and raising or lowering that rate is one of the central bankers’ main tools for influencing the U.S. economy. The Federal Reserve has a two-pronged mandate, promoting maximum employment (a job market where if you want a job, you can get one) and price stability (keeping inflation under control). Lately, those two goals have competed for the Fed’s attention, since neither’s been going great.

Inflation was already accelerating before the Iran war, and last week new data added to that pressure. March’s Personal Consumption Expenditures Index, the Fed’s preferred gauge, showed core inflation (which strips out volatile food and fuel prices) at 3.2%. That’s the highest that’s been since November 2023, underscoring concerns that war-driven increases in energy costs are pushing up prices across the board.

This week, it’s all about employment, and in somewhat of a surprise twist, the data’s been pretty positive. Tuesday saw the release of March’s Job Openings and Labor Turnover Survey (a.k.a. JOLTS). That data showed hires unexpectedly surged in March, though job openings were flat as were firings and quits. (People voluntarily leaving their jobs is a good sign, since it implies folks are confident about finding other work.)

Then on Wednesday, payroll administrator ADP released data on private-sector employment that reinforced this could-be-worse picture with a peek at April. ADP found private employers added a modest number of jobs last month, which still beat markets’ expectations.

This morning, this positive picture came into clearer focus as the Bureau of Labor Statistics released the April Employment Situation Summary, better known as the jobs report. April not only showed decent job growth, the unemployment rate was unchanged. “While we’re certainly not in the robust labor market we were a few years ago (and there are present and near-future risks), things seem to be stable for now,” commented Elizabeth Renter, BW senior economist.

A healthy labor market is great news for the country as a whole, but perhaps less good news for mortgage rates.

When the job market is robust, the Federal Reserve is less likely to cut interest rates, which could lead to lower mortgage rates. However, if inflation continues to rise, the Fed may need to increase the funds rate, causing mortgage rates to go up.

If you’re thinking about refinancing, it’s a good idea if current rates are at least 0.5 to 0.75 percentage points lower than your current rate. This could be a smart move if your current rate is 6.72% or higher.

Consider your financial goals when deciding to refinance. Do you want to lower your monthly payment, shorten your loan term, or access your home equity? Depending on your objectives, you may be willing to pay a slightly higher rate for a cash-out refinance compared to a rate-and-term refinance, as long as the overall costs are lower.

If you’re looking for a lower interest rate, use a refinance calculator to estimate potential savings and determine how long it would take to break even on refinancing costs.

There’s no perfect time to start shopping for a home; the key is being able to comfortably afford a mortgage at current rates. Don’t worry too much about missing out on lower rates in the future, as you can always refinance later. Focus on getting preapproved, comparing lender offers, and figuring out a monthly payment that fits your budget.

If you have a mortgage rate quote that you’re happy with, consider locking it in, especially if your lender offers a float-down option. Rate locks protect you from rate increases during the loan processing period, providing peace of mind in the fluctuating market.

Keep in mind that advertised rates are often sample rates for borrowers with ideal credit and financial profiles. Your customized rate quote will depend on various factors, including your credit score and financial situation.

Rates can change frequently until you lock in a rate, so it’s important to stay informed and act quickly once you find a deal that works for you. The task requires rewriting, could you please provide more details?

Share.

Related Posts

Add A Comment
Leave A Reply