Mortgage Rates Today, May 21, 2026: Rates Seesaw on Shifting Middle East Sentiment

The bigger picture

It's been two weeks since mortgage rates fell perceptibly. But yesterday, there was a noticeable fall.

How big a drop depends on which source you believe. We use ICB, which shows only a small reduction. But Mortgage News Daily (MND) reckons it was a much larger fall.

Either way, the drop was caused by new hope that the Middle East crisis might soon end, reopening the Strait of Hormuz and relieving pressure on oil prices and wider inflation.

"Newswires came out shortly after 10 a.m. ET that suggested the U.S. and Iran are nearing a final draft of a peace agreement," said MND. "While such news has been prone to correction and revision, the market was nonetheless willing to respond quickly and rather forcefully."

This gives hope that a final settlement in the Middle East could drive mortgage rates lower in a sustained way. However, we suspect that overheated inflation will last for several months after the conflict ends, which could keep those rates mostly elevated for the rest of this year.

Scroll on down for details of today's economic reports and how they might affect mortgage rates. We're not expecting fireworks.

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.

You might have noticed worrying reports in the financial press about the likelihood of inflation getting worse. For example, in an e-newsletter on May 10, The Economist wrote, "The Iran war is already causing pain for American motorists, who are paying more than $4.50 a gallon for petrol. Now Americans face a grocery-price shock."

On May 11, MarketWatch had similar concerns: "The surge in gasoline prices tied to the Iran war is set to drive U.S. inflation to a three-year high — and it might get worse before it gets better.

" ... That’s not the only downside of higher inflation," the report continued. "The increase in prices has handcuffed the Federal Reserve. The central bank is likely to be stymied from cutting interest rates aggressively, leaving the cost of borrowing painfully high for prospective home buyers and anyone who needs a big loan."

The Fed

Last week's price indices (the CPI, PPI and IPI ) tend to add weight to these pessimistic arguments. And they landed well after the last meeting of the Federal Reserve's rate-setting committee. Minutes of that meeting were published on May 20 and included the following:

"Almost all participants noted that there was a risk that the conflict in the Middle East could persist for an extended period or that, even after the conflict ended, the prices of oil and other commodities could remain elevated for longer than expected. In such scenarios, these participants expected continued upward pressure on inflation arising from supply chain disruptions, high energy prices, or the pass-through of higher input costs to other prices. The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee’s 2 percent objective than they had previously expected."

Bottom line: "A majority of participants highlighted ... that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent." Policy firming is Fedspeak for a rate hike.

Bond markets vs. stock markets

Mortgage rates are largely dictated by 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."

Comerica Bank's weekly preview

On Monday, Comerica Bank published its weekly preview:

"The minutes of the Fed’s April meeting are unlikely to surprise markets: With the Iran War pushing up inflation but also clouding the growth outlook, FOMC members mostly agree they should hold rates steady near-term. Their guidance may be more circumspect than usual out of courtesy to incoming Chair Warsh, who will want to make a mark on the Fed’s communication at upcoming meetings even if he doesn’t try to change rates. In any case, the war and energy prices will influence the rate outlook more than the Fed leaders’ baton pass.

"The University of Michigan’s Consumer Sentiment Index will likely be revised a bit higher in the final May release, but remain the lowest in the survey’s nearly 50-year history. Consumer inflation expectations likely held near April’s elevated levels. AAA reports the national average gas price reached another four-year high in early May."

Comerica also thought that this week's housing data would probably soften, compared with March.

Comerica's predictions often differ from market expectations, which are a consensus of a wider pool of analysts' forecasts.

Mortgage rates today

There are six economic reports on today's MarketWatch economic calendar. We doubt any of them will have a noticeable impact on mortgage rates.

Two of today's reports are purchasing managers' indices (PMIs), which can affect mortgage rates. However, these come from S&P Global and tend to be less influential than other PMIs. More importantly, markets are blinkered by the situation in the Middle East, meaning they have recently been rarely noticing economic reports.

Anyway, here are the reports scheduled for today, along with market expectations:

• Initial jobless claims for the week ending May 16 — Markets expect 210,000 new claims, down from the previous week's 211,000
• April housing starts — Markets expect housing starts to have run at an annualized rate of 1.42 million in April, down from 1.5 million in March
• April building permits — Markets expect building permits to have run at an annualized rate of 1.39 million in April, up from 1.37 million in March
• May Philadelphia Fed manufacturing survey — Markets expect the index to read 19.0, way down on April's 26.7
• May S&P flash* services PMI — Markets expect the index to read 51.5, slightly higher than April's 51.0
• May S&P flash* manufacturing PMI — Markets expect the index to read 53.7, down from April's 54.5

* A "flash" release is a preliminary reading, subject to subsequent revision.

Mortgage rates tend to fall when a report's actual figures are worse for the economy than expected, and to rise when they're better. When numbers are on or close to forecasts, those rates rarely move in response to the data.