Mortgage Rates Spike as Fed Hike Anticipation Intensifies

Mortgage rates rose this week, as concerns about inflation and predictions for what the Federal Reserve might do about it firmed up.

The average rate on a 30-year fixed-rate mortgage jumped to 6.68% APR in the week ending Sept. 3, according to Zillow, which provides rates to NerdWallet. This is an 11-point increase from last week.

Several key drivers contributed to this week's rise in mortgage rates. One significant factor was the Iran war, which escalated over the weekend and sparked fears of rising oil prices and intensifying inflation. As a result, bond yields increased, causing mortgage rates to follow suit, as they are pegged to the yield on the 10-year Treasury note.

Before the latest conflict in Iran, mortgage rates were already on the rise due to market anticipation of a Federal Reserve rate hike. The Fed's chair, Kevin Warsh, spoke at an event last Friday and emphasized the importance of controlling inflation. This solidified expectations that the Fed will raise short-term interest rates to achieve this goal.