Mortgage Rates Today, August 24, 2026: Rates Face a Worrying Monday

The bigger picture

With no economic reports scheduled for today, mortgage rates will likely move in line with the prevailing mood in bond markets. And that's unlikely to have changed much since Friday, when that mood was grumpy, and those rates nudged higher.

Indeed, there's one more thing for them to worry about. At midnight on Friday, the U.S. imposed 50% tariffs on $20 billion worth of Canadian goods. And Canada said it would retaliate on a dollar-for-dollar basis. The fear is that the U.S. will escalate with yet more tariffs. The Wall Street Journal's lead headline yesterday was, "U.S., Canada Spiral Toward Trade War."

"A retaliatory cycle could complicate the nation’s existing battle with inflation, which remains well above the 2 percent target that the Federal Reserve aims for," said The New York Times on Saturday. And mortgage rates tend to rise on inflation fears.

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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 war and mortgage rates

Peace talks with Iran or mediators have paused now but were underway after Aug. 1. They initially helped mortgage rates fall moderately.

While we all know how fragile such negotiations are and how hard it is to make deals stick, markets seemed happy to work with the hope of an imminent end to the conflict. However, that hope seems to be fading.

"Over the weekend [Aug. 8-9], Mr. Trump said his new strategy was to be 'low-keying it' in Iran, a suggestion that he wants to pressure the country into making a favorable deal without taking major military action," said The New York Times on Aug. 10. Judging by recent posts on Truth Social, that appears to remain U.S. strategy.

Iran is certainly in a weak position economically, and waiting for it to buckle may well be a smart way to resolve the conflict. However, markets are anxious for a rapid reopening of the Strait of Hormuz and seem to have taken the president's new position as a sign that the dispute could drag on for considerably longer than previously expected — hence the recent rises in oil prices and mortgage rates.

The war, oil prices, inflation and markets

Mortgage rates respond to war news because a prolonged closure (or partial 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. It would take years to build the infrastructure necessary to bypass the Strait completely.

UK Maritime Trade Operations center (UKMTO) recorded 103 ships entering the strait and 89 leaving last week, according to Egypt Independent on Saturday. That's a significant increase compared with the lows seen previously, but still only about 20% of the typical pre-war levels of traffic.

Strategic petroleum reserves in the U.S. and elsewhere 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 separate wars involving Iran and Ukraine. That began by sending oil prices lower on most days — though much less so recently. Why buy crude oil when you can't refine it?

Unfortunately, that has so far translated into moderately higher gas and diesel prices than we were seeing a month ago. That's because a lack of refining capacity exacerbates rather than moderates supply issues for consumers and businesses, while demand remains fairly steady.

In his Substack post on Aug. 13, Nobel-prize-winning economist Paul Krugman backed up what we've been saying for some weeks. He referred to the "crack spread," which is the difference between the price of a barrel of crude oil and that for a barrel of "cracked" (aka refined) oil, which he said had exploded by about $35 since the start of the Iran conflict.

"So while the price of a barrel of crude is up around $25, the price of the products refined from that barrel is up about 25+35=60 dollars per barrel," wrote Krugman.

Why? "The shortage of refining capacity has, in turn, held crude prices down: Buyers aren’t willing to pay extremely high prices for crude oil they can’t refine," continued Krugman. "Or to put it a different but equivalent way, the cutoff of oil shipments through the Strait of Hormuz in effect required a large rise in global oil prices to ration demand, but much of that rationing has taken place through a rise in the crack spread rather than a rise in crude oil prices."

Of course, any sudden good news from the Middle East could still send mortgage rates tumbling, regardless of that day's economic reports. Unfortunately, sudden bad news could send them soaring.

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, some now think a hike is likely at the next FOMC meeting on Sep. 16, according to the CME FedWatch tool.

Still, that's been changing. On Friday night, that tool showed a 39.9% chance of a small hike, up from 36.2% on Thursday night. A week ago, investors put that chance at 33.1%, and a month ago at 57.3%.

That big drop was down to markets hoping that July's CPI and PPI would allow the FOMC to hold general interest rates steady at its next meeting, especially following disappointing employment figures in the July jobs report. They won't harm those chances, but the Fed will have seen August's CPI, PPI and jobs report by the time the committee next meets on Sep. 16.

Those August reports had better be good, because the minutes of the last FOMC meeting, published Aug. 19, showed a growing feeling among committee members for a hike to general interest rates if inflation fails to moderate consistently. "Federal Reserve officials indicated at their last meeting that they would need to raise interest rates soon unless there was more progress on bringing down inflation, minutes released Wednesday showed," CNBC reported that day.

Assuming that the war in Iran doesn't end quickly, we think a small hike remains a sensible expectation for Sep. 16. 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.

Watch out for Warsh's key speech this Friday at the Fed's annual symposium in Jackson Hole, WY.

The main tool the Fed uses to rein in inflation is hikes to general interest rates.

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, usually in advance of Fed rate-change announcements.

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."

More recently, on Aug. 17, MarketWatch confirmed The Times's view: "The major reason stocks are holding up near record territory 'is that earnings seem to be fine regardless of higher rates,' said Melissa Brown, managing director of investment-decision research at SimCorp. But someday that is going to change as companies need to refinance."

Mortgage rates today

There are no economic reports on today's MarketWatch economic calendar.

What's next?

The following are the four economic reports most likely to move mortgage rates this week.

The week's star report is Wednesday's personal consumption expenditures (PCE) price index, which is the Fed's favorite gauge of inflation. The second reading of gross domestic product (GDP) in the second quarter is also due that day.

Tomorrow brings the consumer confidence index, and Friday the consumer sentiment index.

Also this week, the (relatively) new Fed Chair Kevin Walsh is scheduled to make his debut address at the central bank's annual symposium in Jackson Hole, WY, at 10 a.m. ET on Friday. The Wall Street Journal wondered if "this might be one of the most looked-ahead-to speeches at the Fed in many years."