Mortgage Rates Dip for the First Time in Seven Weeks, but Forecasts Say They May Rise

Mortgage rates fell this week for the first time in seven weeks. For the week that finished on October 15, NerdWallet reported that the typical interest rate for a 30-year fixed home loan fell by seven basis points to reach 7.34% APR. (A basis point is one hundredth of a percentage point.) The average comes from rates NerdWallet gets from Zillow over the past five business days.

If you are shopping for a mortgage and could be comfortable with this rate, you might want to lock it in, NerdWallet says. On October 12, Fannie Mae released new predictions that are much higher than before. It now expects the average 30-year rate to be 7.4% in the fourth quarter of 2026 and 7.5% in early 2027, and perhaps for the rest of that year. The last time the yearly average was that high was 26 years ago, in 2000. Just last month, Fannie Mae predicted 6.8% for the fourth quarter and 6.7% for 2027.

What does that difference mean? Without counting insurance or taxes, a $400,000 loan at 6.7% would cost about $2,581 a month. At 7.5%, it would be $2,797, which adds up to $2,592 more a year.

Why are rates rising? The Federal Reserve does not set mortgage rates directly, but it sets a target for the rate banks charge each other for overnight loans. When inflation goes well above the Fed's 2% goal, lenders expect the Fed to raise that rate, so they raise mortgage rates first. Inflation rose 3.7% from a year earlier in September, with gasoline up 9.1%, according to the government's Consumer Price Index. Last month the Fed raised its rate for the first time in over three years. Traders now think the Fed will probably hold steady at its meeting on October 27 and 28, though the odds of a hike are higher than a week ago.

If you want to buy a home, NerdWallet says do not lose hope, since the winter months are usually a slow homebuying season and rising rates may leave fewer buyers in the market.