Mortgage Rates Today, Wednesday, September 2: Not Looking Great

We’re seeing mortgage rates soften just a touch this morning, but don’t get too comfortable — this feels like a blip, not a turning point. Attacks are escalating in the Iran war, and last night in a social media post President Trump expressed disdain for negotiation.

Nonetheless, the average interest rate on a 30-year, fixed-rate mortgage ticked down to 6.74% APR, according to rates provided to NerdWallet by Zillow. This is four basis points lower than yesterday but 10 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.

But the renewed fighting has, as it always does, reignited fears of rising oil prices and intensifying inflation, so bond yields are moving higher. Mortgage interest rates are generally benchmarked to the yield on the 10-year Treasury note, so they go where it goes — and the yield just went to its highest point since November 2023.

But rates were already moving higher before this latest round of overseas hostilities. For more on why, keep reading below the chart.

Lately, it seems like mortgage rates have only had reasons to go up.

PCE came in more or less as predicted. No surprises, no real hit to mortgage rates. But that doesn’t mean PCE looked good. The Fed targets a 2% rate of inflation in the PCE index. For July, it was 3.7% — well north of the Fed’s target. (I should probably also mention we’ve been above 2% since March 2021.) So PCE certainly could have been worse, but it was hardly good news.

TBH it didn’t, but markets still came away with the belief that the Fed is finally going to act on inflation when it meets later this month. The CME Group’s odds of a September rate hike were roughly 36% a week ago; today they’re nearly 65%.

We didn’t see much change in mortgage rates following Wednesday’s PCE report, but Friday’s Warsh speech was another story. Rates lurched upward, then continued their climb as we started this week with the Iran war flaring up again. Mortgage rates’ reaction to events overseas is tied directly to inflation, as concerns about the rising cost of oil and its implications for the costs of other goods drive up bond yields. As I mentioned up top, mortgage interest rates are pegged to the 10-year Treasury yield, so as yields rise, so do rates.

In non-inflation-related news, this week we’re getting fresh data about the job market. This morning payroll firm ADP released its latest employment report, showing how August went for the private sector.

It ah, well … it didn’t go great. ADP found private employers added 38,000 jobs last month, the slowest rate of job creation since January. July’s figures got revised upward to 46,000, but August was already lower than July’s initial tally of 44,000 new jobs. August also came in substantially below market expectations.

To say July’s jobs report missed expectations would be a pretty big understatement. Markets were eying an additional 83,000 to 97,500 jobs, depending on whose predictions you looked at. Instead, in July the U.S. economy shed 23,000 jobs. May and June’s totals were revised downward, too.

Markets are hoping that July was a one-off, with August projected to show an increase in the neighborhood of 50,000 jobs. But if August’s numbers show a slump, that could complicate the Federal Reserve’s plans. The Fed raises the funds rate to slow inflation (and again, right now markets are predicting a quarter of a percentage point hike later this month). But when the labor market’s struggling, the Fed props it up by lowering the funds rate.

If August’s jobs report is a miss, the odds of a rate hike from the Fed might fall, and that would take a little of the upward pressure off of mortgage rates. Just a little, though.

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 7.24% or higher.

There is no universal “right” time to start shopping — what matters is whether you can comfortably afford a mortgage now at today’s rates.

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.

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.

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.

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