The average 30-year fixed rate mortgage is 6.63% today, a decrease of 0.06% since yesterday. The 15-year fixed mortgage rate stands at 5.77%, down by 0.09%. The 30-year FHA mortgage now averages 6%, having dropped by 0.04. Meanwhile, the 30-year jumbo mortgage rate is 6.89%, reflecting no change.
The bigger picture
Yesterday brought another fall in mortgage rates, the second in as many days. Once again, the fall was based on optimism that the U.S. and Iran might soon sign a peace deal.
"Crude [oil] futures settle lower in an up-and-down session with conflicting expectations for an agreement to end the U.S.-Iran stalemate," said The Wall Street Journal yesterday afternoon. "Prices spiked early on a report that Iran insists on keeping its enriched uranium, but hopes for a deal were rekindled late in the session with Pakistani mediators in Tehran for meetings. Talk of an imminent deal has proven false on several occasions, sending oil prices back up, Ritterbusch & Associates says in a note."
The crisis in the Middle East has dominated bond markets' attention since the end of February, when the Iran conflict began. And that means it's dominated mortgage rates, too, because those are largely determined by a bond market.
That's left economic reports much less potent than they normally are, with even highly significant data often struggling to be noticed.
Scroll on down for details of today's economic reports and how they might affect mortgage rates.
Mortgage Rate Trends: Past 90 Days
Purchase Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.63% | 6.67% | -0.06% | +0.36% |
| 15-Year Fixed | 5.77% | 5.83% | -0.09% | +0.33% |
| 30-Year Fixed FHA | 6% | 7.2% | -0.04% | +0.36% |
| 30-Year Fixed VA | 6.12% | 6.27% | -0.03% | +0.36% |
| 30-Year Fixed USDA | 6.06% | 6.22% | -0.09% | +0.42% |
| 30-Year Fixed Jumbo | 6.89% | 6.91% | +-0% | +0.29% |
| 5/6 Year ARM | 6.08% | 6.13% | -0.12% | +0.08% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.7% | 6.73% | -0.06% | +0.34% |
| 15-Year Fixed | 5.75% | 5.8% | -0.09% | +0.32% |
| 30-Year Fixed FHA | 5.98% | 7.18% | -0.05% | +0.36% |
| 30-Year Fixed VA | 6.12% | 6.27% | -0.03% | +0.37% |
| 5/6 Year ARM | 6.17% | 6.22% | -0.45% | +0.21% |
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 only two economic reports on today's MarketWatch economic calendar. The consumer sentiment index is sometimes consequential for mortgage rates, but we're expecting it and today's other report to be overshadowed by seesawing optimism and pessimism over the prospects for a Middle East settlement.
Anyway, here are the reports scheduled for today, along with market expectations:
- May's consumer sentiment (final figure) — Markets expect the index to read 48.2, unchanged from earlier
- April's leading economic indicators — Markets expect this figure to improve to -0.3% from -0.6% in March
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.
Markets will be closed on Monday for the Memorial Day holiday, and mortgage rates shouldn't move that day. We'll be back in the early hours of Tuesday morning.
