The average 30-year fixed rate mortgage was 6.73% yesterday, unchanged since the day before. The 15-year fixed mortgage rate stood at 5.71%, the same as one the day before. The 30-year FHA mortgage averaged 6.02% yesterday, having stayed the same. Meanwhile, the 30-year jumbo mortgage rate was 6.95%, reflecting no change.
The bigger picture
Are bond markets (one of which largely determines mortgage rates) correct when they assume that yields are currently high? Well, yes, if they look at only the last five years or so.
But why do they believe that the last five years are a new normal? Why not look back further? Go back before 2007, and bond yields were consistently even higher than they are now.
Yes, rates for 30-year, fixed-rate mortgages bottomed out at 2.67% in December 2020, according to Freddie Mac. But they peaked at 18.44% in October 1981.
Markets (and consumers) have short memories
And both the high and the low were exceptional because they were responses to seriously rare events: sky-high inflation in 1981 and the Covid pandemic in 2020. Unless you're expecting another once-in-60-year event imminently, it's unwise to see either as a reliable guide to the near future.
Yesterday, Apollo's chief economist suggested a reason for that thinking: "The market puts more weight on recent events in investment decisions. In short, the market has a short memory because many traders have never seen anything else," wrote Dr. Torsten Sløk.
"But what if this way of investing is wrong?" asks Sløk. "What if the stock market is about to enter a high inflation period similar to what we saw in the 1960s and 1970s ... ? Maybe it was the period from 2009 to 2022 that was unusual in fixed income [investments, meaning bonds]? If that is the case, then yield levels today are not high. Maybe the market today is putting too little weight on the U.S. fiscal problems?"
What's coming for mortgage rates?
We're not suggesting that mortgage rates of 18.44% are likely anytime soon. They're not impossible, but the chances currently look pretty slim.
However, absent some apocalyptic event, we struggle to envision rates falling significantly below their current levels within the next couple of years.
Maybe they'll fall a bit. They might even dip to the point where they begin with a five. But, in our view, it's equally possible they'll rise above 7% or even 8%. Much depends on how tariffs and fiscal policy play out in the coming months.
This isn't intended to scare anyone. But we worry that some are waiting to make their move in the housing market because they're convinced mortgage rates will inevitably fall much further than is looking probable.
They might fall or they might rise. And our advice is not to bank on either.
Mortgage Rate Trends: Past 90 Days
Purchase Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.73% | 6.76% | +0% | -0.04% |
| 15-Year Fixed | 5.71% | 5.76% | +0% | -0.07% |
| 30-Year Fixed FHA | 6.02% | 7.22% | +0% | -0.13% |
| 30-Year Fixed VA | 6.12% | 6.26% | +0% | -0.14% |
| 30-Year Fixed USDA | 6.06% | 6.2% | +0% | -0.17% |
| 30-Year Fixed Jumbo | 6.95% | 6.97% | +0% | -0.06% |
| 5/6 Year ARM | 6.81% | 6.85% | +0% | -0.06% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.78% | 6.81% | +0% | -0.07% |
| 15-Year Fixed | 5.7% | 5.75% | +0% | -0.07% |
| 30-Year Fixed FHA | 6% | 7.2% | +0% | -0.13% |
| 30-Year Fixed VA | 6.15% | 6.3% | +0% | -0.14% |
| 5/6 Year ARM | 6.91% | 6.94% | +0% | +0.01% |
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 tariffs are especially influential at the moment.
Mortgage rates today
Today's sole economic report on today's MarketWatch economic calendar comprises leading economic indicators for June. Markets are expecting them to worsen slightly to -0.2% from May's -0.1%.
Higher-than-expected numbers typically exert upward pressure on mortgage rates, while lower-than-expected ones tend to push them downward. On-forecast figures can leave those rates virtually unchanged. And relatively unimportant reports are often ignored.
Although today's sounds grand, it rarely affects mortgage rates. So, we'll be surprised if this one has any perceptible impact on them.
Tomorrow
Federal Reserve Chair Jerome Powell is scheduled to address a banking conference tomorrow at 8:30 a.m. Eastern. And markets will be listening closely to see if he bends to the intense political pressure he's been experiencing recently.
If he does, that would be deeply uncharacteristic of Powell. He's always been a studiedly apolitical person who has so far never allowed politicians to affect his opinions.
So, if he appears to do so tomorrow, that could be huge. But in what way?
Markets might welcome any sign that the Fed's more likely to cut general interest rates more quickly than previously revealed. And that could help mortgage rates fall.
However, if they sniff political interference in any change of posture, that could send those rates higher. Most investors greatly value the Fed's independence, and worry that any such interference will make higher inflation more likely. If that's their perception, mortgage rates could rise.
