Mortgage rates declined noticeably on Friday, recovering from the sharp increase recorded the previous day. The average rate for a 30-year, fixed-rate mortgage reached 7.18% APR, according to rates provided to NerdWallet by Zillow. That was 14 basis points below Thursday’s level and two basis points lower than a week earlier.
A basis point equals one-hundredth of a percentage point. Despite Friday’s decline, mortgage rates remained elevated throughout October. The monthly average for a 30-year mortgage was 7.3%, compared with 6.98% in September.
Markets are closed during the weekend, so Friday’s rates are unlikely to change significantly before Monday, although lenders can set their own pricing.
Mortgage pricing responds to several factors, including inflation data, employment reports, Federal Reserve decisions, global developments and movements in the bond market. Traders had largely expected the Federal Reserve to keep the federal funds rate unchanged at Wednesday’s meeting, limiting the decision’s impact on mortgage rates.
At the post-meeting press conference, Fed Chair Kevin Warsh said September’s rate increase was beginning to help reduce inflation toward the central bank’s 2% goal, while noting that policymakers had not reached firm conclusions. The September Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, showed inflation rising 3.6% year over year, up from 3.4% in August.
Because the September rate increase occurred during the month, October’s inflation data will offer a fuller indication of its effect. The October PCE report is scheduled for November 25. Investors will also watch the October jobs report, due Friday, November 6. Strong employment data could support another federal funds rate increase at the Fed’s December 8-9 meeting, as it would suggest the labor market could withstand higher borrowing costs.
For homeowners, refinancing generally becomes more attractive when current rates are at least 0.5 to 0.75 percentage points below an existing mortgage rate, provided the borrower stays in the home long enough to recover closing costs. At Friday’s average rate, borrowers with existing rates around 7.68% or higher may want to evaluate a refinance, although relatively few homeowners are likely to meet that threshold.
Home buyers do not have to wait for a specific rate level if they can comfortably afford today’s payment. Comparing lenders, seeking preapproval and assessing the monthly payment against a household budget remain important steps. Prospective buyers who are not ready to purchase can focus on reducing debt and building savings for a down payment.
Borrowers with a mortgage quote they consider attractive may also want to consider a rate lock. Some lenders offer a float-down option, which can allow borrowers to benefit if rates fall during the lock period. Personalized rates can differ from advertised rates because lenders consider factors such as credit score, debt-to-income ratio, employment history, down payment, loan type, location, property type and loan amount. Rates can also change several times a day until a loan is locked.
Sources: NerdWallet.