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Mortgage interest rates have been up and down in recent days, as the outlook in Iran remains uncertain. But this volatility has stayed within a relatively finite range. Zoom out just a little and those daily changes flatten out into a picture of stability.
The average interest rate on a 30-year, fixed-rate mortgage ticked down to 6.14% APR, according to rates provided to BW by Zillow. This is four basis points lower than yesterday but 10 basis points higher than a week ago. (See our chart below for more specifics.) A basis point is one one-hundredth of a percentage point.
Mortgage rates’ movements over March and April have been driven by what’s going on in Iran, and how that’s been affecting U.S. markets. For more, keep reading below the chart.
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 6.64% or higher.
🏡 Should I start shopping for a home?
There is no universal “right” time to start shopping — what matters is whether you can comfortably afford a mortgage now at today’s rates.
Focus on the following key steps:
1. Get preapproved by comparing lender offers and understanding what monthly payment fits your budget. BW’s affordability calculator can help you estimate your potential monthly payment. If buying a new home is not feasible at the moment, consider paying down existing debts and building your down payment savings. This not only frees up more cash flow for a future mortgage payment but also helps you secure a better interest rate when you are ready to buy.
2. Consider locking your mortgage rate if you have a quote you are satisfied with, especially if your lender offers a float-down option. A float-down allows you to take advantage of a better rate if the market drops during your lock period. Rate locks provide protection from rate increases while your loan is being processed, providing peace of mind in a fluctuating market.
3. Note that advertised rates are sample rates typically for borrowers with perfect credit, large down payments, and payment for mortgage points. Your customized quote will depend on factors such as credit score, financial profile, and other individual circumstances. Rates can change daily, and even hourly, so if you are happy with a deal, it is advisable to commit.
4. Keep in mind that even personalized rate quotes can change until you lock, as lenders adjust pricing multiple times a day in response to market changes. Rates seen online may differ from the actual quote due to various factors, so it is important to carefully review and understand the terms before committing.
By following these steps and staying informed about the mortgage process, you can make well-informed decisions when it comes to securing a mortgage.