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 rose 11 points to 6.68% APR in the week ending Sept. 3, 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 business days.
But mortgage rates were on the rise before any new fighting broke out overseas. Let’s talk about why, what might move rates next, and what you should know about today’s rates if you’re considering a home purchase or refinance.
🤓 Kate on Rates: September 3, 2026
September Fed outlook shifts
Mortgage rates got a big push last Friday morning, when Federal Reserve Chair Kevin Warsh spoke at the Kansas City Fed’s annual gathering in Jackson Hole, Wyoming. This was his first official speech in that role, and markets were hopeful he would use the platform to provide a bit more intel about his plans for federal monetary policy.
Traditionally, that’s how chairs have used the Jackson Hole speech, but Warsh has made clear from day one that he’s not keen on maintaining the status quo. Warsh’s belief that the Fed should communicate less, including cutting out forward guidance from its post-meeting statements, has left markets desperate for any indication of what the central bankers’ plans might be.
That’s nothing new from Warsh, but a point he made shortly afterward caught markets’ attention: “Short-term interest rates are the predominant tool to achieve the dual mandate.”
Like Swifties parsing lyrics to determine Taylor’s true meaning, Fed watchers put these pieces together and decided a rate hike is coming this month. The odds of a 25-basis-point increase to the funds rate, which had been in the 30% range according to the CME Group’s FedWatch tool, promptly doubled. They’ve since dropped slightly, as a couple of Fed governors indicated they might vote to hold the funds rate steady when the Fed meets Sept. 15-16. But there’s still a much more significant chance of a September rate hike than there was before Warsh spoke.
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Labor market could complicate Fed’s decision
Let’s turn to the other side of the Federal Reserve’s dual mandate, since this week we’re getting new job market data. As we’ve now discussed at length, the Fed targets a 2% rate of inflation. Its other goal is maximum employment, which essentially means businesses can find employees and workers can find jobs.
In July, the economy lost 23,000 jobs — 100,000 below economists’ predicted increase of 83,000. May’s and June’s totals, which were both increases, got revised downward, too.
That places added emphasis on August, which could be evidence that July was a blip … or that it might have started a trend. If August’s numbers are negative, that could force the Fed to consider a rate hike. While raising the funds rate is the central bankers’ key tool for slowing inflation, cutting the funds rate allows the Fed to bolster a struggling labor market. The third option, holding the funds rate steady, could buy them more time to see how these dynamics play out.
If the odds of a September rate hike start to drop, that could relieve some of the upward pressure on mortgage rates. But bear in mind that there’s still plenty to keep rates elevated, particularly the reignited Iran war.
Are 7% rates coming back?
Even if mortgage rates don’t go higher, they’re already in somewhat dicey territory. While our average from Zillow is in the high sixes, visiting various mortgage lenders’ websites this morning to see what APR they’re offering on 30-year, fixed-rate loans turned up a pretty wide range of rates.
