Mortgage Rates Soar Amid Inflation Fears and Anticipation of Rate Hike

Mortgage rates have risen to 6.68% APR on average for a 30-year fixed-rate mortgage, according to Zillow's latest data. This increase is largely attributed to market concerns about inflation and predictions of a potential Federal Reserve rate hike.

The escalation of the Iran war has also contributed to rising bond yields, which in turn have pushed up mortgage rates. The Federal Reserve's dual mandate of maximum employment and price stability remains a top priority, with Chair Kevin Warsh emphasizing that short-term interest rates are the key tool for achieving these goals.

Markets are now anticipating a 25-basis-point increase to the federal funds rate at the Fed's upcoming meeting on September 15-16. This has led some mortgage lenders to start pricing in this potential rate hike, resulting in higher mortgage rates.

The labor market will also be closely watched, with the release of the August Employment Situation Summary tomorrow morning. A negative jobs report could force the Fed to consider a rate hike, which would further push up mortgage rates.