The average 30-year fixed rate mortgage was 6.77% yesterday, unchanged since the day before. The 15-year fixed mortgage rate stood at 5.92%, the same as one the day before. The 30-year FHA mortgage averaged 6.09% yesterday, having stayed the same. Meanwhile, the 30-year jumbo mortgage rate was 6.91%, reflecting no change.
The bigger picture
When Dr. Torsten Sløk, Apollo's chief economist, wrote about this week last Tuesday, he identified three events "that could dramatically reshape market narratives." We'd add Thursday's crucial inflation report. Sløk's three are:
- On July 29-30, "Microsoft, Meta and Amazon report back-to-back, and investors are watching the AI trade obsessively." This is primarily a stock market issue, but it could have a knock-on effect on bonds and mortgage rates.
- On July 29, a Fed rate announcement. "Nine of 18 Fed officials project a rate hike this year. Forward guidance has been eliminated, making individual Fed speakers the only remaining signal of intent. Recent Fedspeak has been unambiguously hawkish on inflation." More below.
- "The Strait of Hormuz is a critical chokepoint. Escalation could constrict oil flows, deplete global reserves, and spike energy prices, adding fuel to the inflation battle the Fed is waging and putting further upward pressure on yields [and mortgage rates]."
The Middle East is potentially the biggest catalyst of changes to mortgage rates. Last Friday, markets were hopeful that a peace deal might emerge. And there was a pause in fighting over the weekend. But U.S. rhetoric has been especially bellicose since then.
Scroll on down to see how today's lone economic report 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 | 6.77% | 6.81% | +0% | +0.32% |
| 15-Year Fixed | 5.92% | 5.98% | +0% | +0.26% |
| 30-Year Fixed FHA | 6.09% | 7.3% | +0% | +0.29% |
| 30-Year Fixed VA | 6.2% | 6.36% | +0% | +0.25% |
| 30-Year Fixed USDA | 6.16% | 6.32% | +0% | +0.29% |
| 30-Year Fixed Jumbo | 6.91% | 6.93% | +0% | +0.32% |
| 5/6 Year ARM | 7.07% | 7.16% | +0% | +0.92% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.82% | 6.86% | +0% | +0.32% |
| 15-Year Fixed | 5.89% | 5.95% | +0% | +0.29% |
| 30-Year Fixed FHA | 6.08% | 7.29% | +0% | +0.27% |
| 30-Year Fixed VA | 6.19% | 6.28% | +0% | +0.24% |
| 5/6 Year ARM | 6.14% | 6.19% | +0% | +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) is due to conclude a two-day meeting on Wednesday. It's an opportunity for the FOMC to hold general interest rates steady or to increase them.
A week ago, the CME FedWatch tool put the chances of the committee hiking general rates at just 12.8%. By the weekend, the chances had risen to 36.3%. That's not good for mortgage rates and likely reflects rises over most of last week.
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.
The Fed's last meeting
May's price indices (the CPI, PPI, IPI and PCE) tend to lend weight to pessimistic arguments about future inflation rates. And those reports landed either side of the last meeting of the FOMC on Jun. 16-17.
The minutes of that meeting were released on July 7, and Barron's reported that day:
"The minutes from Kevin Warsh’s [the new Fed chair's] first Federal Reserve policy meeting contained few surprises, but underscored how divided policymakers remained over the path of interest rates. That could be a sign the Fed will stay on hold for longer."
"Nine policymakers penciled in at least one rate hike by the end of the year, according to the Summary of Economic Projections released in June," continued Barron's. "Eight officials expected no changes to the benchmark rate, while only one official believed the committee would implement a rate cut by the end of the year. Warsh declined to provide projections."
The minutes themselves revealed: "Most participants remarked on scenarios in which inflationary pressures would dissipate and inflation would soon begin to return to 2 percent. In such scenarios, almost all of these participants noted that it would likely be appropriate to maintain or eventually lower the target range for the federal funds rate. Most participants, however, also pointed to scenarios in which, in the context of stable labor market conditions, inflation would remain elevated due to strong AI-related demand, the conflict in the Middle East, or the effects of tariffs. In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted to return inflation to 2 percent."
In this context, "policy firming" very likely means one or more hikes to general interest rates this year.
Read Could the Fed Really Raise Interest Rates Next Week? for reasons long delays in reaching a peace settlement with Iran could drive oil prices, inflation and mortgage rates much higher.
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."
Mortgage rates today
There is only one economic report on today's MarketWatch economic calendar.
That covers durable goods orders in June. And markets expect those orders to have improved, growing by 2.1% that month, after falling by 4.5% in May.
Typically, mortgage rates fall when economic data disappoint market expectations and rise when figures exceed those expectations.
What's next?
Events in the Middle East over the last couple of weeks might push mortgage rates appreciably higher if the renewed conflict is not swiftly resolved. That's 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. And many oil refineries in the Middle East and Russia are out of commission following war damage, sending oil prices lower. Why buy oil when you can't refine it?
Unfortunately, that doesn't translate into lower gas and diesel prices because a lack of refining capacity exacerbates rather than moderates supply issues, while demand remains fairly steady.
This week brings some important economic reports, culminating in Thursday's PCE price index, which is the Fed's favorite gauge of inflation. Tomorrow we're due July's consumer confidence index.
