Mortgage Rates Today, May 6, 2025: Brace for Fed Day Tomorrow

The bigger picture

Mortgage rates barely moved yesterday. The more important of that morning's April purchasing managers' indices for the services sector came in a little better than expected. But it wasn't sufficiently better to push those rates higher.

Today's economic reports are even less likely to move mortgage rates. We're due only March's trade balance, and it's hard to imagine that making much difference unless it brings truly shocking data.

It's the Fed, stupid!

As we said yesterday, the main driver of movements in mortgage rates this week is likely to be the two-day meeting of the Federal Reserve's rate-setting body, formally known as the Federal Open Market Committee or FOMC. That meeting is scheduled to start this morning. And, if it decides to change general interest rates, it should announce the fact at 2 p.m. (EST) tomorrow.

That's looking increasingly unlikely, especially following last Friday's unexpectedly strong jobs report. The CME FedWatch tool puts the odds of those rates staying the same at 97.3%, slightly higher than yesterday's 96.8%. But these things are never certain, and a shock announcement would almost inevitably affect mortgage rates.

You may have read that FOMC rate changes don't have any impact on mortgage rates. And that's true when the Fed does what everyone's expecting. Investors trade ahead of announcements based on those expectations. However, an unexpected cut or hike is very likely to immediately affect mortgage rates, moving them in the direction of other interest rates, though probably further.

Almost as important as the announcement will be a news conference hosted by Fed Chair Jerome Powell. That's scheduled for 2:30 p.m. (EST) that same afternoon.

Investors will be hoping Powell will give clues to future cuts that the FOMC might have penciled in during its meeting. If he does, that, too, will likely affect mortgage rates. However, we suspect he'll continue his recent line: that the Fed must wait to see how the trade war and other issues affect inflation and economic growth before signaling its next moves.

It's not all doom and gloom

Have we been too pessimistic recently? If so, it's mainly because we're reflecting the views of what we perceive to be most economists.
But also because a poor economy usually brings lower mortgage rates, which we're always keen to see.

A Wall Street Journal article today reminded us that not everything is terrible. For example, anonymous sources say that officials hope to unveil the first trade deal with another country later this week since "Liberation Day's" reciprocal tariffs were announced.

Meanwhile, last Friday's jobs report was much better than most expected, suggesting surprising resilience in the labor market. Stock markets have been recovering much of the ground they lost after Liberation Day. And oil prices tumbled yesterday after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) unveiled another increase in supply.

We're far from out of the woods yet, as we warned yesterday. And we still shouldn't be surprised to see mortgage rates fall back further in the coming weeks. But how long that lasts is anyone's guess.

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 — as we've seen frequently recently.

Here's Comerica Bank's weekly insights into what to expect over the next few days: "The FOMC is expected to keep the fed funds target rate on hold at a range of 4.25% to 4.50% at Wednesday’s interest decision meeting. Policymakers will not release updated forecasts for real GDP, unemployment, inflation, or the fed funds rate; those quarterly forecasts will next be updated in June. Markets will be extra attentive to Chair Powell’s comments on the tradeoff between controlling inflation and supporting the job market. The foreign trade deficit in goods and services registered another monthly record in March on surging goods imports. ... With real GDP down in the first quarter and employment up, nonfarm productivity will be lower and unit labor costs higher in the quarter’s release this week.

Mortgage rates today and later this week

As we discussed above, there's only one economic report on today's MarketWatch economic calendar. And we doubt it (the March trade deficit) will affect mortgage rates.

Tomorrow's Fed rate announcement is the event this week with the most potential to move mortgage rates, but only if there's a change to general interest rates. Few expect such a thing.

Thursday brings productivity numbers for the first quarter of 2025. They're expected to slump to -0.7% from +1.5% in the last quarter of 2024.

No economic reports are due on Friday, but a veritable swarm of senior Fed officials (11 of them) have speaking engagements that day. Their views on future cuts to general interest rates will be interesting but less authoritative than the Fed chair's news conference tomorrow.