Mortgage Rates Today, Thursday, June 4: Slightly Higher

Mortgage rates edged higher this week, with two financial outlets reporting different levels for the average 30-year fixed-rate loan as markets reacted to overseas conflict and domestic inflation data.

The average interest rate on a 30-year, fixed-rate mortgage rose to 6.35% APR, according to rates provided to NerdWallet by Zillow on Thursday ^[1]. A separate NerdWallet report on Friday placed the average at 6.46% APR, an increase of 11 basis points from the previous day ^[2]. A basis point is one one-hundredth of a percentage point.

Both reports attributed the fluctuations to the situation in Iran. Bond markets have been reacting to headlines from the Middle East, with rates falling when the conflict appears to be abating and rising when aggression intensifies ^[1]. The war's disruption to oil production and international shipping has throttled supply chains and raised prices, accelerating inflation ^[1].

Last week's Personal Consumption Expenditures price index showed that in April, inflation reached its worst level since May 2023 ^[1]. The Federal Reserve targets a 2% PCE; April's was 3.8% ^[1]. This presents a challenge for the Federal Reserve's new chair, Kevin Warsh, who faces pressure to lower interest rates even as rapid inflation typically requires the central bank to raise them ^[1].

The case for Federal Reserve rate cuts weakened further after the release of employment data. The May National Employment Report from payroll firm ADP came in slightly stronger than expected ^[1]. Unemployment remained unchanged in May, but the number of jobs added exceeded expectations ^[2]. A reasonably healthy job market means the Fed needs to focus on curbing inflation rather than stimulating the economy ^[1].

Mortgage rates would likely head lower if Fed rate cuts appeared imminent, but if central bankers look to raise rates, mortgage rates would probably rise as well ^[1].