On Wednesday, Oct. 28, the Federal Reserve announced that central bankers would leave the federal funds rate unchanged. Since this was in line with market expectations, mortgage rates shouldn’t have much of a reaction — yet.
The average rate on a 30-year fixed-rate mortgage slid 10 basis points to 7.17% APR in the week ending Oct. 28, 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 <a t affect your credit score
Does this mean mortgage rates will stay below 7.5%?
Not necessarily. Mortgage rates could be completely different tomorrow.
In fact, we’ll probably see rates shift in response to the Personal Consumption Expenditures price index, or PCE, which is set to be released on Thursday, Oct. 29. This is the Fed’s preferred measure of inflation. Central bankers didn’t have this data during voting, which may be one reason they decided against adjusting the federal funds rate again quite yet.
If this week’s PCE data shows inflation rising, mortgage rates will probably go up over the next few weeks as lenders look to protect their November.
So far, 30-year mortgage rates are averaging 7.3% for October, compared with September’s average of 6.98%. On this trajectory, it’s conceivable that we could see rates hit 7.5% this year — a monthly average we haven’t seen since October 2023.
Why higher rates wouldn’t be the end of the world
If and when the Fed does raise the federal funds rate again, it will be meant as a temporary treatment for overheated inflation.
Think of it as bitter medicine: It might be tough to swallow, but getting inflation under control actually paves the way for lower rates down the line. Moderating inflation could also lead to lower prices on essential goods that have been eating away at the prospective home buyer’s wallet, freeing up more cash for your monthly mortgage payment.
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