mortgage rates moved noticeably lower on Monday, Nov. 2, but the average 30-year fixed rate remained above the 7% mark. The rate fell to 7.07% APR, based on figures Zillow provided to NerdWallet.
That was an 11-basis-point decline from the previous day and 13 basis points below the level recorded a week earlier. A basis point equals one-hundredth of a percentage point.
This week’s employment data could influence where mortgage rates go next. The October jobs report is scheduled for Friday, Nov. 6. A report showing steady or improving employment could strengthen the case for the Federal Reserve to raise its overnight borrowing rate again at its Dec. 8-9 meeting.
The Federal Reserve does not directly set mortgage rates, but it determines the federal funds rate, which affects the cost for banks to borrow from one another. Lenders can increase mortgage pricing when they expect the federal funds rate to rise. The central bank raised that rate in September.
Inflation is another factor under consideration. The September Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, showed prices rising 3.6% year over year, up from 3.4% in August. The October PCE report is due Nov. 25.
For homeowners, refinancing may be worth considering when current rates are at least 0.5 to 0.75 percentage points below the existing mortgage rate, provided the borrower plans to remain in the home long enough to recover closing costs. At the current average, that calculation could point to borrowers with rates around 7.57% or higher, although relatively few homeowners may fit that profile.
Home shoppers do not necessarily need to wait for lower rates if they can comfortably afford today’s payments. Comparing lender offers, seeking preapproval and determining an affordable monthly payment can help buyers make a decision. Paying down debt and building savings may also improve a borrower’s position before applying.
Borrowers who already have a mortgage quote they find attractive may consider locking the rate. A rate lock can protect against increases while a loan is processed, while a float-down option may allow the borrower to benefit if rates fall during the lock period.
Advertised mortgage rates are examples and may assume strong credit, a large down payment or the payment of mortgage points. A borrower’s actual quote can also depend on credit score, debt-to-income ratio, employment history, down payment, loan type, location, property type and loan amount. Even personalized quotes can change until the rate is locked because lenders may adjust pricing several times a day.
Sources: NerdWallet.