Mortgage Rates Today, August 25, 2026: Consumer Confidence on Today's Agenda

The bigger picture

Mortgage rates inched lower yesterday, chasing slightly falling oil prices, this time triggered by the U.S. plan to isolate Iran economically. Without that movement, they may have risen modestly.

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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 and mediators have stalled, and President Donald Trump has adopted a new strategy of economic warfare on Tehran. "Treasury Secretary Scott Bessent
said the U.S. is launching a new campaign to isolate the Iranian regime, warning that countries and companies that do business with Tehran will face the wrath of the Trump administration," The Wall Street Journal reported on Aug. 24. Oil prices fell only modestly on Bessent's announcement.

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 barely changed gas prices than we were seeing a month ago, and moderately higher diesel ones. 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 42.1% chance of a small hike, up from 39.9% last Friday night. A week ago, investors put that chance at 36.1%, and a month ago at 55.3%.

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 body of opinion among committee members that a hike to general interest rates may prove necessary 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. The main tool the Fed uses to rein in inflation is rate hikes.

Stand by for a highly important speech by Walsh on Friday at the Fed's Jackson Hole Economic Policy Symposium in Wyoming. His message that day could significantly affect mortgage 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."

Comerica Bank's outlook for this week

On Monday, Comerica Bank published its weekly outlook:

"The Fed’s preferred measure of core inflation (Core PCE prices less food and energy) likely slowed slightly in July, helped by downward revisions to the second quarter. Total PCE inflation likely improved more than core because gas prices fell, but that’s cold comfort since they are up again in August. Personal consumption expenditures and personal incomes likely grew modestly in July, but were about flat after accounting for inflation.

"Payroll employment will likely be revised slightly higher in the preliminary benchmark revision to its level in March 2026. The revision uses data from the Quarterly Census of Employment and Wages (QCEW). The QCEW directly measures employment much more comprehensively than the survey of establishments that the Bureau of Labor Statistics uses for the monthly payrolls report. The biggest gap that the QCEW fills in relative to the monthly establishment survey is the number of jobs added at newly-opened workplaces and lost at closing ones. New workplaces aren’t yet on the government’s list to survey, and the statisticians can’t tell in real time whether an employer that doesn’t respond to the survey has closed shop or is just slow to report. The revision will likely paint a slightly better picture of job growth in 2025 and early 2026, but not enough to change the job market’s high-level narrative: Job growth has picked up in 2026 after a weak 2025."

Comerica also said it wasn't expecting major changes in the second reading of gross domestic product (GDP) in the second quarter compared with the first reading.

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 three economic reports on today's MarketWatch economic calendar.

Perhaps surprisingly, real estate data rarely affect mortgage rates, so it's the consumer confidence index that's most likely to move those rates today.

Today's reports are:

• June S&P Cotality Case-Shiller Home Price Index — No market forecast. Prices rose by 0.9% in May
• July new home sales — Markets expect 615,000 new homes to have been sold that month (annualized), compared with 628,000 in June
• August consumer confidence index — Markets expect the index to have fallen back to 90.2, down from the previous 90.8

Typically, mortgage rates rise when economic data are better than expected and fall when they're worse. On-forecast figures often leave those rates unchanged.

What's next?

The week's star report is tomorrow'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.

Friday's schedule includes the consumer sentiment index, which is different from today's consumer confidence index.