Mortgage rates moved higher today. The average interest rate on a 30-year fixed purchase mortgage rose to 6.861%, up from 6.823% yesterday, according to Zillow data provided. For borrowers looking to refinance, the average 30-year refinance rate is 6.973%, while the 15-year refinance rate is 5.998%.
Other mortgage rates are also at different levels today. The average rates for conforming purchase mortgages are:
- 30-year fixed: 6.861%
- 20-year fixed: 6.775%
- 15-year fixed: 6.004%
- 10-year fixed: 5.792%
- 7-year ARM: 7.034%
- 5-year ARM: 6.213%
- 3-year ARM: 8.25%
Current mortgage rates
- Jumbo mortgage: 6.583%
- VA mortgage: 6.005%
- FHA mortgage: 5.99%
Refinancing rates are also staying high. Today's refinance rates include:
- 30-year fixed refinance: 6.973%
- 20-year fixed refinance: 6.927%
- 15-year fixed refinance: 5.998%
- 10-year fixed refinance: 6.312%
Why mortgage rates are rising
Mortgage rates have risen since the US war in Iran began in late February. When the Middle East conflict looks like it is getting worse, mortgage rates usually move higher along with 10-year US Treasury yields, which are a key benchmark for mortgage rates.
Rates can fall when the conflict appears closer to ending. When there are signs that the Middle East conflict could move toward a resolution, Treasury yields and mortgage rates tend to decline, according to US News.
Oil prices are another major reason rates are under pressure. The Middle East conflict has pushed oil prices higher at times. More expensive oil can raise the cost of making and transporting goods, which can increase inflation.
Inflation and mortgage rates
{{/usCountry}}Oil prices are another major reason rates are under pressure. The Middle East conflict has pushed oil prices higher at times. More expensive oil can raise the cost of making and transporting goods, which can increase inflation.
Inflation and mortgage rates
{{/usCountry}}Higher inflation can keep interest rates higher. When inflation rises, investors often expect interest rates to remain high for longer. This can put upward pressure on Treasury yields and, in turn, mortgage rates. Inflation had recently shown signs of slowing. June's Consumer Price Index report showed inflation slowing to 3.5%, helped by lower energy prices. That was down from 4.2% in May, which had been the fastest pace of price growth in three years.
However, the improvement in inflation may not last. The renewed tensions in the Middle East could push energy prices higher again. That could make inflation harder to control and reduce the chances of mortgage rates falling quickly.
The Federal Reserve is closely watching inflation. The Fed has a 2% inflation target and kept its policy rate unchanged at its July meeting, as widely expected, according to US News. But the July Fed meeting showed a change in opinion among policymakers. Three Fed policymakers voted for a quarter-point rate hike in July. That was different from the June meeting, when all policymakers voted to keep rates unchanged.
Fed rate outlook
Inflation above the Fed's target could lead to higher rates. Because inflation is still above 2%, the central bank could raise interest rates in the coming months if price pressures remain strong. The Fed does not directly set mortgage rates. Instead, it controls monetary policy, which affects broader interest-rate trends. Mortgage rates are also heavily influenced by the bond market and Treasury yields.
The Fed has two main goals. Its dual mandate is to maintain stable prices while also supporting maximum employment. The latest jobs report could make the Fed more cautious about raising rates. July's jobs report showed that the US economy created far fewer jobs than expected. That weakness could reduce pressure on the Fed to raise interest rates.
The next inflation report could be important for mortgage rates. July's CPI report is due on Wednesday and could change expectations about what the Federal Reserve will do with interest rates. Experts do not expect mortgage rates to fall sharply soon. Most experts expect the 30-year fixed mortgage rate to remain above 6% over the next few years.
Mortgage rate forecast
A return to pandemic-era mortgage rates looks unlikely. While an unexpected change in the US economy could cause rates to fall quickly, experts say it is unlikely that mortgage rates will drop below 3% or even 4% in the foreseeable future.
Mortgage refinance rates usually move in the same direction as purchase rates. However, refinance rates are often a few basis points higher than rates for new home purchases. Mortgage rates have changed sharply over the past few years. Freddie Mac has collected weekly mortgage-rate data since 1971. Over that period, the median mortgage rate has been 7.23%, according to the data cited by US News.
Mortgage rates hit an unusually low level during the pandemic. The average 30-year fixed rate fell to a historic low of 2.65% in January 2021. Those very low rates helped increase demand for both home purchases and refinancing. Rates later climbed dramatically. The 30-year fixed mortgage rate rose to nearly 8% in October 2023 before coming back down to around 6.5% according to US News.
Today's rates are still far below the historical record. The record-high 30-year mortgage rate was 18.63% in 1981, showing how much mortgage borrowing costs have changed over the decades.
For borrowers today, the key issue is that rates remain elevated. A 30-year mortgage rate near 6.9% means homebuyers are facing much higher borrowing costs than during the ultra-low-rate period of 2020 and 2021. The direction of inflation, Treasury yields, Federal Reserve policy and the Middle East conflict will remain important for where mortgage rates go next.