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Mortgage interest rates are starting out high today, but there’s a strong possibility they’ll go lower if the administration’s statements about the situation in Iran pan out. Yesterday Secretary of State Marco Rubio told reporters that the war is technically over, and President Trump ended his plan to “guide” ships through the Strait of Hormuz.
On top of all that, at least one outlet is reporting that the U.S. and Iran are approaching an agreement to actually end the war. All of the above has the bond market feeling good, and we should see that reflected in mortgage rates.
But not quite yet. As of this morning, the average interest rate on a 30-year, fixed-rate mortgage rose to 6.38% APR, according to rates provided to NerdWallet by Zillow. This is nine basis points higher than yesterday and 28 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.
The U.S. labor market is also making positive headlines. Keep reading below the chart to learn how it all fits together.
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.
If we actually get a clear end to active aggression and a plan for reopening the Strait of Hormuz — or heck, even a strong sense that reopening will happen — that could prop up the bond market and send mortgage rates lower. (Remember, bond prices go up, bond yields go down, and so do mortgage rates.)
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 so far the data is… not too bad. Yesterday saw the release of March’s Job Openings and Labor Turnover Survey (a.k.a. JOLTS). JOLTS provides insight into trends in the labor force, with monthly info on how many jobs employers have open, how many Americans are quitting their jobs and how many layoffs occurred.
March actually looked decent, mainly because hires unexpectedly surged. On the other hand 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.)
This morning, 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.
Friday, we’ll get more government data as the Bureau of Labor Statistics releases the April Employment Situation Summary, better known as the jobs report. That’s what gives us the official unemployment rate. A downbeat jobs report could easily offset JOLTS (which is from March) and ADP (which isn’t comprehensive).
The Federal Reserve generally tempers strong inflation by raising rates, but data that shows a weaker labor market could put more pressure on the Fed to cut rates. Lower interest rates sound good, but they could come with serious tradeoffs, since a softer job market can signal a more fragile economy. There’s also always the possibility that the Fed governors decide inflation is the bigger threat, which could set the stage for higher rates despite weak employment.
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 6.88% 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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