The average 30-year fixed rate mortgage was 6.71% yesterday, a decrease of 0.02% since the day before. The 15-year fixed mortgage rate stood at 5.85%, the same as one the day before. The 30-year FHA mortgage averaged 6.1% yesterday, having dropped by 0.02. Meanwhile, the 30-year jumbo mortgage rate was 6.78%, reflecting a decrease of 0.08%.
The bigger picture
Mortgage rates just inched lower yesterday. They fell further first thing when a couple of economic reports fell short of market expectations, but rose as the day progressed.
There's little on today's calendar that's likely to move those rates far. For that, we'll likely have to wait for tomorrow's jobs report or for definitive news about the on-again-and-off-again peace talks with Iran.
Yesterday afternoon's lead headline in The Wall Street Journal read, "Negotiators Close In on Deal With Iran to Open Hormuz." So, there are grounds for hope, although the U.S. is yet to comment on the proposal drawn up by Iran and Oman.
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 | 6.71% | 6.75% | -0.02% | +0.19% |
| 15-Year Fixed | 5.85% | 5.92% | +0% | +0.16% |
| 30-Year Fixed FHA | 6.1% | 7.31% | -0.02% | +0.23% |
| 30-Year Fixed VA | 6.17% | 6.33% | -0.01% | +0.17% |
| 30-Year Fixed USDA | 6.11% | 6.27% | +0.01% | +0.15% |
| 30-Year Fixed Jumbo | 6.78% | 6.8% | -0.08% | +0.19% |
| 5/6 Year ARM | 6.3% | 6.38% | +0.1% | +0.21% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.75% | 6.79% | -0.01% | +0.18% |
| 15-Year Fixed | 5.82% | 5.88% | +0% | +0.15% |
| 30-Year Fixed FHA | 6.08% | 7.29% | -0.02% | +0.21% |
| 30-Year Fixed VA | 6.18% | 6.26% | -0.01% | +0.16% |
| 5/6 Year ARM | 6.1% | 6.16% | -0.07% | +0.04% |
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."
Comerica Bank's outlook for this week
On Monday, Comerica Bank published its weekly outlook:
"Employers likely added jobs at a moderate pace in July, holding the unemployment rate steady. The labor force participation rate is forecast to edge up from June’s post-pandemic low. Even so, the household survey will likely show that the labor force continues to lag hiring, a trend that will push down the unemployment rate if sustained. Unemployment among recent grads without work experience will likely be lower than at this time last year. Average hourly earnings growth likely held steady. Also out this week, job openings likely rose in the stale May release, while hires and quits are expected to be little changed.
"The Institute for Supply Management’s Purchasing Managers Indexes (ISM PMIs) are forecast to show moderate manufacturing growth and brisk services growth in July. Input price inflation is forecast to run hot again in the surveys, and businesses in both sectors will likely report jobs added in the month. Non-farm productivity likely picked up in the second quarter as private output growth outpaced hours worked. Unit labor costs likely rose at a similar pace to the first quarter’s."
Comerica's forecasts are sometimes different from published market expectations, which are drawn from a broader pool of analysts' consensus forecasts.
Mortgage rates today
There are yet again three economic reports on today's MarketWatch economic calendar. None of them typically affects mortgage rates much, and they'd have to contain some pretty shocking data to have a perceptible impact.
Here are market expectations for today's three reports:
- Q2 preliminary nonfarm productivity — Markets are expecting the report to show productivity grew by 0.6% in the second quarter, more slowly than the 0.8% seen in the first
- Jobless claims during the week ending Aug. 1 — Markets expect 204,000 new claims, compared with 197,000 the previous week
- June wholesale trade— Markets expect this trade to have grown 0.3% that month, better than May's 0.1%
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?
Tomorrow's official jobs report for July is the next big event on the calendar.
This is by far the most important economic report this week — and often in any given month. Look out for details tomorrow morning.
Peace talks with Iran or mediators have been underway since Saturday, and have helped mortgage rates fall moderately this week. While we all know how fragile such negotiations are and how hard it is to make deals stick, markets seem happy to work with the hope of an end to the conflict.
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.
