Mortgage Rates Today, August 31, 2026: Friday's Fed Speech Sent Rates Higher

The bigger picture

Saturday's New York Times summed up last Friday's speech by Fed Chair Kevin Warsh: "He offered his most comprehensive views to date about the state of the
economy. He cleared up confusion about the central bank’s commitment to getting inflation down to its 2 percent target after sending mixed messages the month prior. And he acknowledged that the Fed might have 'work to do' to make good on that pledge, suggesting a readiness to raise interest rates if price pressures do not ease.

"But the path ahead for Mr. Warsh is a precarious one," continued The Times. "Financial markets now see a quarter-point increase at the central bank’s next meeting on Sept. 15-16 as more likely than not, leaving Mr. Warsh with a tough decision whether to follow through with action." Of course, he shares that decision with other voting members of the Fed's rate-setting body.

Scroll on down for much more on the forces affecting mortgage rates today. No economic reports are on Monday's calendar.

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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 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.

Last Friday, Aug. 28, the recently appointed Fed Chair Kevin Warsh delivered a speech at the Fed's annual Jackson Hole Economic Policy Symposium in Wyoming. And it was his remarks that swung the FedWatch tool's majority behind a hike. It now says there's a 57% chance of one following the next FOMC meeting, up from 39.9% a week earlier.

Warsh acknowledged that the Fed still had a way to go before the current inflation rate (3.7% annually, according to July's PCE price index) gets close to the central bank's long-term goal of 2%. In some ways, he was merely stating the obvious: most economists expect the inflation rate to climb again in August because gas prices resumed their upward trend that month.

But hearing it directly from Warsh, who had only recently been appointed by a president hoping for lower interest rates, was sobering for investors.

Assuming that the war in Iran doesn't end quickly, we think a small hike remains a sensible expectation for Sep. 16. A prolonged partial closing of the Strait of Hormuz is likely to fuel inflation. And 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, usually in advance of Fed rate-change announcements.

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.

On Aug. 30, the U.S. launched air strikes, hitting two Iranian rocket launchers, the first action in a month, according to The New York Times. Although Iran retaliated with an attack on Jordan, the actions so far appear to be isolated military incidents, and the economic strategy seems to remain intact.

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.

Hopes for progress on peace talks were dulled on Aug. 27, according to PBS. "No negotiations are happening right now, and this will continue until the president feels that maybe they come to the table in a meaningful way," White House press secretary Karoline Leavitt told "Fox & Friends" on Thursday.

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.

The Strait of Hormuz Live Traffic & Oil Crisis Tracker reckons shipping traffic through the Strait was 3.5% of its normal, pre-war level last week. We're unsure of that website's credentials and credibility, but Fox News on Saturday reported, "Traffic in the Strait of Hormuz remains at levels below the beginning of the war."

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. And some observers worry that it will grow increasingly difficult to access remaining inventory for technical extraction reasons.

The U.S. Energy Information Administration says strategic petroleum reserve crude inventories fell to 289,726 million barrels for the week ending Aug. 21, marking the lowest level since 1983. The reserve stood at 415,064 million barrels before the Iran conflict began.

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 less so recently. Why buy crude oil when you can't refine it?

Unfortunately, that has so far translated into gas prices barely changing from those we were seeing a month ago, and moderately higher diesel prices. 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.

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?

This week's economic reports largely focus on employment data, culminating in Friday's jobs report for August. For mortgage rates, monthly jobs reports are often the single most consequential report each month.

We're also due some important purchasing managers' indices (PMIs) and several less influential reports.