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We’re seeing lower mortgage interest rates this morning as the Iran ceasefire struggles to stand on shaky Bambi legs. Will it find its footing? Time will tell, though where rates go may be less about what’s actually going on overseas and more about how the markets feel about current events.
The average interest rate on a 30-year, fixed-rate mortgage ticked down to 6.17% APR, according to rates provided to NerdWallet by Zillow. This is seven basis points lower than yesterday and nine 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.
This morning we got March inflation numbers that came in as markets anticipated, but markets were expecting them to be pretty rough. Keep reading below the chart for details.
P.S.: While the economy never sleeps, markets are closed on the weekends, as are we. 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.
We’re starting to get economic data — the stuff the Nerds focus on in normal times, since it often provides clues about where rates will go — that could begin to quantify the effects of the Iran conflict on the U.S. economy. These reports can be significant predictors of the Federal Reserve’s actions, since keeping the economy healthy is the Fed’s fundamental job. The central bankers attempt to do this by encouraging maximum employment (basically, a labor market where if you want a job, you can get a job) and price stability (keeping inflation in check so prices and consumer behavior are predictable).
Even though the Fed does not set mortgage rates, its actions ripple out through the economy. We often see mortgage rates head higher or lower on expectations of action from the Federal Reserve. If it doesn’t look like the central bankers will be in a rate-cutting mood — and for this month’s meeting, it most certainly does not — we shouldn’t expect downward pressure on mortgage rates.
Last week, we got data on the employment front. The Bureau of Labor Statistics released the March jobs report April 3, revealing much stronger gains than expected (+178,000 vs. a projected +60,000). On one hand, yay. But on the other hand, the BLS collects data focused on the pay period that includes the 12th of the month, so really, we’re seeing a reflection of the first two weeks of the war.
This week has been all about the other side of the Fed’s equation: Inflation. Yesterday we got February’s Personal Consumption Expenditures price index (PCE). On one hand, PCE is the Fed’s preferred measure of inflation. But on the other hand, how much was data from the Before Times going to tell us? (Normally in April we’d be getting March data, but last fall’s federal government shutdown still has the Bureau of Economic Analysis running behind.)
While we might remember February as a stretch of halcyon pre-war days with lower-priced gas, PCE reflected inflation levels that were already high. So-called core PCE, which strips out prices for food and fuel (since face it, those tend to be unstable), came in as predicted at 3% year-over-year. And this is all pre-Iran War.
This morning gave us our first glimpse of wartime inflation, and no surprise, energy prices really took a hit. Overall the March Consumer Price Index (CPI) from the Bureau of Labor Statistics came in right at markets’ predicted 3.3% year-over-year, and core CPI (same deal as PCE, no food or fuel) was a hair under expectations at 2.6%. That overall number jumped almost a full percentage point compared to February, when CPI was at 2.4%.
“For now, this jump in the inflation rate can be seen as something the Fed could, in theory, ‘look through,'” notes Elizabeth Renter, NerdWallet senior economist. “Not only does Fed interest rate policy have a limited impact on supply shocks such as this, the initial shock alone won’t drive persistent inflation, or faster price growth. It could eventually stoke an inflationary problem — as these higher prices seep into other parts of the economy and consumers and businesses modify their expectations and behaviors — but we aren’t there right now.”
The Federal Reserve can sometimes feel like the “This is fine” dog, having a nice cup of coffee while the room around them burns. But it’s not that they’re insensitive or clueless. Trying to keep the U.S. economy healthy is a huge task, so yeah, the Fed makes decisions with a level of caution and judiciousness that can feel excruciatingly slow. This frequently involves the kind of watchful calculation we’re seeing now from central bankers with respect to inflation.
To sum up this whole wonky explanation and answer the question: Mortgage rates are more likely to drop due to improvements in the situation in Iran, though if things get worse, we’ll see rates rise again. The Fed’s April 28-29 meeting is unlikely to make a difference since, in sum, all the employment and inflation data of the past two weeks is … fine.
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 6.67% or higher.
Also consider your goals: Are you trying to lower your monthly payment, shorten your loan term or turn home equity into cash? For example, you might be more comfortable with paying a higher rate for a cash-out refinance than you would for a rate-and-term refinance, so long as the overall costs are lower than if you kept your original mortgage and added a HELOC or home equity loan.
If you’re looking for a lower rate, use NerdWallet’s refinance calculator to estimate savings and understand how long it would take to break even on the costs of refinancing.
🏡 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.
If the answer is yes, don’t get too hung up on whether you could be missing out on lower rates later; you can refinance down the road. Focus on getting preapproved, comparing lender offers, and understanding what monthly payment works for your budget.
NerdWallet’s affordability calculator can help you estimate your potential monthly payment. If a new home isn’t in the cards right now, there are still things you can do to strengthen your buyer profile. Take this time to pay down existing debts and build your down payment savings. Not only will this free up more cash flow for a future mortgage payment, it can also get you a better interest rate when you’re ready to buy.
If you already have a quote you’re happy with, you should consider locking your mortgage rate, especially if your lender offers a float-down option. A float-down lets you take advantage of a better rate if the market drops during your lock period.
Rate locks protect you from increases while your loan is processed, and with the market forever bouncing around, that peace of mind can be worth it.
🤓 Nerdy Reminder: Rates can change daily, and even hourly. If you’re happy with the deal you have, it’s okay to commit.
🧐 Why is the rate I saw online different from the quote I got?
The rate you see advertised is a sample rate — usually for a borrower with perfect credit, making a big down payment, and paying for mortgage points. That won’t match every buyer’s circumstances.
In addition to market factors outside of your control, your customized quote depends on your:
Even two people with similar credit scores might get different rates, depending on their overall financial profiles.
👀 If I apply now, can I get the rate I saw today?
Maybe — but even personalized rate quotes can change until you lock. That’s because lenders adjust pricing multiple times a day in response to market changes.
About the author
Kate Wood is a lending expert and certified financial health counselor (CHFC) who joined NerdWallet in 2019. With an educational background in sociology, Kate feels strongly about issues like inequality in homeownership and higher education, and relishes any opportunity to demystify government programs. Prior to NerdWallet, she wrote about home remodeling, decor and maintenance for This Old House.
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