Mortgage Rates Today, Wednesday, July 8: Back on the Rise

Mortgage rates are a little higher this morning and could keep going up as the U.S.-Iran ceasefire appears to have fallen apart. The “are a little higher” happened because the United States resumed strikes on Iran yesterday in response to reported Iranian strikes on ships in the Strait of Hormuz. The “could keep going” is my prediction since today President Trump said he believes the ceasefire is over and that’s already sent oil prices higher.

The average interest rate on a 30-year, fixed-rate mortgage rose to 6.39% APR, according to rates provided to NerdWallet by Zillow. This is three basis points higher than yesterday but one basis point lower than a week ago. (See our chart below for more specifics.) A basis point is one one-hundredth of a percentage point.

Throughout the spring, mortgage rates were extremely sensitive to events in the Middle East, as bond markets — which play a key role in determining mortgage rates — were wracked with inflation fears. But as the conflict wore on, markets settled in and we only saw reactions to major events. With June’s memorandum of understanding and a more durable ceasefire, this summer rates have been more attuned to the normal domestic stuff we’d expect during peacetime — think economic data and Federal Reserve updates.

This latest news already sent bond yields higher, so mortgage rates are likely to go up as well. It may also shift the Federal Reserve’s outlook, especially if tensions continue to escalate. For more on what’s happening with the Fed, and how it relates to mortgage interest rates, keep reading below the chart.

Average mortgage rates, last 30 days

📈 What influences mortgage rates?

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.

As I mentioned above, over the past month-plus mortgage interest rates have been more responsive to the type of domestic news that normally drives rate changes. For the most part, that’s economic data and statements from members of the Federal Reserve. These are parts of the same whole, as economic data is often interpreted from the perspective of the Fed — how will the central bankers think about and react to these numbers?

We say it a lot: The Fed doesn’t set mortgage rates. But its policy decisions influence borrowing costs throughout the economy, and that certainly extends to mortgage rates. Markets like to know where the Federal Reserve is headed, whether that’s toward rate cuts, hikes or staying the course. An anticipated rate increase from the Fed is generally more than enough to put upward pressure on mortgage rates.

The Fed’s goal is a healthy economy, which it achieves by focusing on two main goals. In no particular order, they’re price stability (is inflation manageable?) and maximum employment (if you want a job, can you find a job?).

As anyone who’s filled up a vehicle in the last few months can attest, price stability has not been great. Even before the Iran war stoked inflation, it had been above the central bankers’ preferred 2% level for years. The Fed generally raises the federal funds rate (that’s the short-term borrowing rate it actually sets) in order to slow inflation.

But for the Federal Reserve to feel confident about making that move, the central bankers also need to feel assured that the labor market is healthy. Higher interest rates slow inflation by discouraging business borrowing and expansion, which can also slow hiring.

Lately it had seemed like this wouldn’t be a problem since the labor market was doing surprisingly well. But those expecting fireworks from last week’s Employment Situation Summary from the Bureau of Labor Statistics got more fizzle than spark. June job gains came in well below projections, at 57,000 compared to an anticipated 100,000 or more.

Though June was the fourth consecutive month of job gains, it wasn’t much — and April and May got revised downward. While unemployment was slightly down, that wasn’t really a win either. The unemployment rate dropped because fewer Americans were looking for work.

The jobs data felt like assurance that the central bankers could comfortably remain in wait-and-see mode, especially with the U.S.-Iran ceasefire and the reopened Strait of Hormuz potentially alleviating war-driven inflation. (Inflation would still be a fire in need of putting out, but at least no one would be pouring gas on it. Expensive, expensive gas.)

But if the ceasefire falls apart, inflation fears will ratchet back up — and a Fed rate hike, already no longer an “if” but a “when,” could potentially come sooner. Both of those forces will likely push mortgage rates higher.

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 6.89% 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.

🔒 Should I lock my rate?

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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