30-year mortgage rates edged lower today. The average interest rate on a 30-year home purchase mortgage is 6.823%, down from 6.843% on Friday, according to Zillow data. Refinance rates are slightly higher. The average rate for a 30-year mortgage refinance is 6.943%, while the average 15-year refinance rate is 5.973%.
Mortgage rates are still being affected by the war in Iran. Home loan rates have risen since the beginning of the US war in Iran in late February. When the conflict looks like it could get worse, mortgage rates usually move higher along with 10-year US Treasury yields, an important benchmark for mortgage rates, according to US News.
Rates can fall when tensions ease. When the Iran conflict appears to be moving closer to a resolution, mortgage rates and bond yields tend to move lower. This means developments in the Middle East can have a direct impact on what Americans pay to borrow for a home.
Why the Iran war matters for mortgage rates
Oil prices are one major reason. The bond market that influences mortgage rates is very sensitive to changes in prices. The Middle East conflict has put pressure on oil prices, which can increase the cost of making and transporting goods.
Higher oil prices can increase inflation. When energy costs rise, businesses often face higher costs. Those higher costs can eventually push prices higher for consumers. In simple terms, higher oil prices can mean higher inflation, and higher inflation can lead to higher interest rates.
{{/usCountry}}Higher oil prices can increase inflation. When energy costs rise, businesses often face higher costs. Those higher costs can eventually push prices higher for consumers. In simple terms, higher oil prices can mean higher inflation, and higher inflation can lead to higher interest rates.
{{/usCountry}}Also read: US markets today: Why did stocks struggle? Dow falls as Iran tensions push oil higher
Inflation has slowed, but the situation is still uncertain. June's Consumer Price Index report showed inflation slowing to 3.5% as energy prices fell. That was a big improvement from May, when inflation was running at 4.2%, its highest pace of price growth in three years, according to US News. The recent improvement in inflation may not last. The renewed conflict in the Middle East could push energy prices higher again. That could make it harder for inflation to continue falling quickly.
What the Federal Reserve is doing
The Federal Reserve kept interest rates unchanged in July. Fed policymakers left rates steady at their July meeting, as markets widely expected. But three Fed policymakers wanted a rate hike. Three policymakers voted for a quarter-point increase in interest rates in July. That was different from June, when all policymakers voted to keep rates unchanged.
Inflation is still above the Fed's target. The Federal Reserve wants inflation to stay around 2% over the longer term. With inflation still above that level, there is a chance the central bank could raise interest rates in the coming months, according to US News.
The Fed does not directly set mortgage rates. The central bank controls monetary policy, which influences borrowing costs and the overall direction of mortgage rates. Mortgage rates are also strongly affected by the bond market, especially 10-year Treasury yields.
Jobs data could make the Fed more cautious. The Fed has a dual mandate of keeping prices stable and supporting maximum employment. The July jobs report released last Friday showed that the US created far fewer jobs than expected. A weaker job market could reduce pressure for a rate hike. If hiring continues to slow, the Fed may have another reason to avoid raising rates. However, the next inflation report could change expectations about what the central bank does next.
The next major inflation report is coming Wednesday. July's Consumer Price Index report is scheduled for release on Wednesday. Investors and economists will closely watch the numbers because they could influence expectations for the Fed's next interest-rate decision.
Current mortgage rates today
The 30-year fixed mortgage rate is 6.823%. This remains the most common loan choice for many US homebuyers because the interest rate stays fixed for the full loan term.
The 20-year fixed rate is 6.734%. This loan has a shorter repayment period than a 30-year mortgage, which can mean higher monthly payments but less interest paid over the life of the loan.
The 15-year fixed rate is 5.973%. The rate is below the current 30-year rate, but borrowers generally have higher monthly payments because the loan must be paid off in half the time.
The 10-year fixed rate is 5.792%. This has the lowest rate among the fixed-rate conforming purchase loans listed today, but the shorter repayment period can mean much higher monthly payments.
Adjustable-rate mortgages are also available. Today's average rate is 6.807% for a 7-year ARM and 6.573% for a 5-year ARM. The 3-year ARM rate is much higher. The average rate for a 3-year adjustable-rate mortgage is 8.25%, according to US News.
Jumbo mortgage rates are at 6.528%. Jumbo loans are generally used for homes that require borrowing above standard conforming loan limits. Government-backed mortgage rates are around 6%. The average VA mortgage rate is 5.991%, while the average FHA mortgage rate is 5.99%.
Mortgage refinance rates today
Refinancing is still relatively expensive. Today's average 30-year refinance rate is 6.943%, which is higher than the 6.823% rate for a new 30-year purchase mortgage.
The 20-year refinance rate is 6.88%. Borrowers looking to refinance into a 20-year loan are seeing rates below 7% today. The 15-year refinance rate is 5.973%. This is the same rate listed for a 15-year purchase mortgage. The 10-year refinance rate is 6.312%. Refinance rates can move in the same direction as purchase mortgage rates, but they are often a few basis points higher, according to US News.
Where mortgage rates are headed
Experts expect mortgage rates to remain above 6% for some time. Most experts do not expect 30-year fixed mortgage rates to quickly return to the very low levels seen during the pandemic. A return to 3% mortgage rates looks unlikely. Mortgage rates could fall if the economy changes sharply or another major event pushes borrowing costs lower. But a return to rates below 3% or even 4% does not appear likely in the foreseeable future.
Mortgage rates have already come a long way from their recent peak. The 30-year fixed mortgage rate climbed close to 8% in October 2023 before falling back toward the mid-6% range.
Today's rates are still high compared with the pandemic era. The 30-year fixed rate reached a record-low 2.65% in January 2021, according to Freddie Mac data. Those extremely low rates helped drive demand for both home purchases and refinancing. But today's rates are far below the historic record.
Freddie Mac says the highest 30-year mortgage rate recorded was 18.63% in 1981. Since Freddie Mac began collecting mortgage-rate data in 1971, the median mortgage rate has been 7.23%, according to US News.
The key takeaway for homebuyers is that rates remain elevated. Today's small decline to 6.823% is positive for borrowers, but mortgage rates can change quickly depending on inflation, Treasury yields, Federal Reserve policy and global events.
What homebuyers should consider
The interest rate is not the only cost of buying a home. Buyers also need to look at the home's purchase price and make sure the full monthly payment fits their budget. The loan term can make a big difference. Most borrowers choose a 30-year fixed mortgage because spreading payments over 30 years can make the monthly payment more affordable.
A 15-year mortgage can save money on interest. Borrowers who can afford the higher monthly payments may save tens of thousands of dollars in interest over the life of the loan by choosing a 15-year mortgage instead of a 30-year loan, according to US News.
Other housing costs also need to be included. Buyers should budget for property taxes, homeowners insurance, homeowners association fees and private mortgage insurance, if applicable. The monthly payment matters more than the headline rate alone.
A lower mortgage rate does not automatically mean a home is affordable. Buyers should consider the home price, loan amount, repayment period and all other housing costs before deciding how much they can spend.
For now, mortgage rates are moving slightly lower but remain above 6%. Today's 6.823% 30-year purchase rate shows that borrowing costs have eased from their recent highs, but inflation, the Iran conflict, Treasury yields and upcoming economic data could continue to move rates in either direction.