Mortgage rates are a lot like spring weather, changing just frequently enough to keep you checking the forecast. At least for now, rate trends feel less like a thunderstorm and more like a stubborn spring drizzle.
The average rate on a 30-year fixed-rate mortgage rose 17 basis points to 6.42% APR in the week ending May 21, according to rates provided to NerdWallet by Zillow. (A basis point is one one-hundredth of a percentage point.) We calculate our weekly average using daily APRs recorded over the past five business days.
Since the war in Iran began on Feb. 28, mortgage rates have risen from the high-5% to the mid-6% range. That’s probably not enough to cancel your homebuying plans, but it’s enough to add about $100 a month in interest on a $400,000, 30-year fixed-rate mortgage. Between gas, groceries and everything else inflation has touched lately, buyers may feel that extra $100 more than they would have a year ago.
No one really knows when the skies will clear, including incoming Federal Reserve Chair Kevin Warsh, who is scheduled to be sworn in tomorrow. He’ll inherit the unenviable task of balancing stubborn inflation against a cooling job market.
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Fed meeting minutes indicate shifting forecast
The Federal Reserve doesn’t determine mortgage rates, but it does influence them indirectly by setting its short-term borrowing rate.
Yesterday, we got the tea — er, meeting minutes — from the most recent Federal Reserve meeting on April 28-29. We already know the conclusion: The central bankers voted to keep the federal funds rate unchanged, in a widely expected move.
But the newly released notes suggest policymakers are becoming more concerned that inflation may linger longer than expected. Higher oil prices tied to the war in Iran were a major reason why.
Fed officials warned that rising energy and transportation costs could continue working their way into consumer prices in the months ahead, even if the war in Iran ends. And that’s before the central bankers saw the latest Consumer Price Index, which dropped two weeks after the Fed meeting, showing that annual inflation heated up to its highest rate since May 2023.
If inflation remains elevated, most officials even signaled openness to future rate hikes. That’s important for today’s mortgage rates: Stubborn inflation means investors demand higher returns from bonds, and mortgage rates tend to follow that upward movement.
“This was a tough week for bonds on multiple levels,” explains Kate Wood, lending expert at NerdWallet, noting inflation data as well as ongoing geopolitical tensions with China and Iran. “U.S. debt doesn't carry the clout it once did. Traders are demanding higher yields, and mortgage rates generally rise along with yields.”
In other words: Homebuyers waiting for a perfectly sunny mortgage rate forecast may be waiting a while.
🤓 From the Nerds: Kate on Rates
My advice for putting roots down
Some good news might be on the horizon: Iran says it’s reviewing a U.S. peace proposal to end the conflict. For would-be homebuyers, does that mean it’s worth holding out to see if lower mortgage rates will follow?
Speaking as an avid gardener and recent first-time homebuyer: Trying to time mortgage rates perfectly is a bit like planting seedlings in spring. On a rainy day, they get waterlogged. On a sunny day, they fry. If you wait too long, they become rootbound in their containers — and you risk missing the window altogether.
Homebuying can feel similar. Whether you’ve outgrown your current home or are putting down roots for the first time, knowing how much house you can comfortably afford matters more than chasing the perfect mortgage rate.
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