The average 30-year fixed rate mortgage is 6.78% today, unchanged since yesterday. The 15-year fixed mortgage rate stands at 5.93%, the same as one day ago. The 30-year FHA mortgage now averages 6.13%, having dropped by 0.01. Meanwhile, the 30-year jumbo mortgage rate is 6.9%, reflecting no change.
The bigger picture
"President Trump said late Saturday that he had canceled threatened U.S. strikes on Iran, provided a deal could be reached rapidly that reopened the Strait of Hormuz and ended what he described as Iran’s nuclear threat," reported The New York Times yesterday. If the positive vibe in markets following that announcement continues, mortgage rates today might follow oil prices lower.
Last Friday, we asked if it would be a "quiet day for rates (Iran war permitting)?" It wasn't. And it had little to do with the Iran war.
That morning, the U.S. Treasury warned banks that it would be intervening, in partnership with the Japanese government, to support the yen, Japan's currency. Bond markets didn't like that. And one type of bond largely determines mortgage rates, which explains why they (wholly unexpectedly) had another bad day.
Scroll on down to see about today's economic reports and how they might affect mortgage rates.
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Mortgage Rate Trends: Past 90 Days
Purchase Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.78% | 6.82% | +0% | +0.24% |
| 15-Year Fixed | 5.93% | 5.99% | +-0% | +0.21% |
| 30-Year Fixed FHA | 6.13% | 7.34% | -0.01% | +0.24% |
| 30-Year Fixed VA | 6.22% | 6.38% | -0.01% | +0.2% |
| 30-Year Fixed USDA | 6.17% | 6.33% | +-0% | +0.24% |
| 30-Year Fixed Jumbo | 6.9% | 6.92% | +-0% | +0.29% |
| 5/6 Year ARM | 6.31% | 6.38% | -0.64% | +0.18% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.83% | 6.87% | +0% | +0.24% |
| 15-Year Fixed | 5.9% | 5.95% | +0.01% | +0.23% |
| 30-Year Fixed FHA | 6.12% | 7.32% | -0.02% | +0.22% |
| 30-Year Fixed VA | 6.22% | 6.31% | -0.01% | +0.2% |
| 5/6 Year ARM | 7.02% | 7.08% | +0.89% | +0.91% |
What's coming up?
Although economic reports are usually the main drivers of changes to mortgage rates, they're not the only ones. The general mood in markets and economically consequential news can also affect those rates. News items concerning the war, employment, inflation, tariffs, and deficit funding are especially influential at the moment.
The Fed
The Federal Reserve's rate-setting body (the Federal Open Market Committee or FOMC) left general interest rates unchanged on Jul. 29, as many expected. However, most now think a hike is likely at the next FOMC meeting on Sep. 16, according to the CME FedWatch tool.
Assuming that the war in Iran doesn't end quickly, we think such a hike is a sensible expectation. A prolonged conflict is likely to fuel inflation, and the Fed has a duty to maintain that at 2% annually, a goal reaffirmed by Kevin Warsh, the new Fed Chair, on Jul. 29. The main tool the Fed uses to rein in inflation is rate hikes.
The Fed doesn't directly set new fixed-rate mortgage rates. But the factors that influence its decisions (and to a lesser extent the decisions themselves) certainly do move those rates.
Why bond markets act differently from stock markets
Mortgage rates are largely dictated by the yields on a type of bond, the mortgage-backed security (MBS). So, we focus on bond markets.
On May 7, The New York Times explored why stock markets and bond markets have been behaving so differently from each other since the start of the conflict in the Middle East.
Investors in stocks have been wagering that U.S. companies will continue to generate large profits during the conflict. And the stock market typically cares only about whether dividends and company values will continue to rise.
"But the bond market is another matter," said The Times. "Bond traders have maintained a much sharper focus on risk. Yields remain correlated with shifts in the price of oil. As oil prices have spiked and inflation has risen, yields have risen and bond prices, which move in the opposite direction, have fallen."
Mortgage rates today
There are three economic reports on today's MarketWatch economic calendar. One covers construction spending in June, and the other two are July purchasing managers' indices (PMIs) for the manufacturing sector.
PMIs can be useful indicators of future economic activity because they measure the goods, services and raw materials that purchasing departments are procuring. Ones from the Institute for Supply Management (ISM) tend to be more influential than those from S&P Global, and those relating to the service sector are more consequential than those for manufacturing. Neither of them typically moves mortgage rates very far.
Here are market expectations for today's three reports
- July manufacturing PMI from S&P Global — Markets have no expectations because there is no consensus forecast
- July manufacturing PMI from the ISM — Markets expect the index to have risen to 54 from 53.3 in June
- June construction spending — Markets expect growth to have accelerated to 0.3% from 0.1% in May
Typically, mortgage rates rise when such figures are better than expected and fall when they're worse. On-forecast figures often leave those rates unchanged.
What's next?
We're due two PMIs for the services sector on Wednesday. But this week is mostly about employment data, starting with tomorrow's job openings and labor turnover survey (JOLTS) for June.
By far the most important economic report this week (and often in any given month) is the jobs report, formally known as the employment situation report. July's is due on Friday morning.
Air strikes in the Middle East over the last couple of weeks or so have pushed mortgage rates appreciably higher, and they may continue upward if the conflict's re-escalation continues for long. But there's now hope for an early settlement.
Mortgage rates respond to war news because a prolonged closure of the Strait of Hormuz could again choke off 20% of the world's oil supply, putting additional pressure on gas, diesel and many other prices.
Strategic petroleum reserves in the U.S. and globally are now at multi-decade lows, meaning there's less room to cushion consumers from rising gas prices. It may not feel like it, but this method of suppressing pump prices has been in place since the start of the conflict.
Trading Economics says, "US Strategic Petroleum Reserve crude inventories fell to 307.650 million [barrels, presumably] for the week ending July 24, marking the lowest level since 1983."
Meanwhile, many oil refineries in the Middle East and Russia are out of commission due to damage from the wars involving Iran and Ukraine, sending oil prices lower. Why buy oil when you can't refine it?
Unfortunately, that hasn't so far translated into appreciably lower gas and diesel prices because a lack of refining capacity exacerbates rather than moderates supply issues for consumers and businesses, while demand remains fairly steady.
