The average 30-year fixed rate mortgage was 6.55% yesterday, an increase of 0.03% since the day before. The 15-year fixed mortgage rate stood at 5.7%, up by 0.02%. The 30-year FHA mortgage averaged 5.92% yesterday, having risen by 0.04. Meanwhile, the 30-year jumbo mortgage rate was 6.8%, reflecting a decrease of 0.04%.
The bigger picture
Freddie Mac's Thursday-to-Thursday weekly average, out yesterday, shows mortgage rates inching higher. Still, "In the coming days, mortgage interest rates are likely to be slightly lower than that weekly average, given that 10-year Treasury yields have been trending downward since the Memorial Day holiday weekend," wrote Erika Giovanetti, U.S. News' consumer lending analyst, in an e-newsletter yesterday.
"Bond yields – and thus mortgage rates – have declined in recent days as peace negotiations between the U.S. and Iran advance," continued Giovanetti.
And that's the crucial point. If those negotiations succeed, mortgage rates should continue to fall, although perhaps not as quickly as some expect. However, if the talks fail, we should probably brace for those rates to move sharply higher.Scroll on down for details of all 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 | 6.55% | 6.59% | +0.03% | +0.18% |
| 15-Year Fixed | 5.7% | 5.76% | +0.02% | +0.17% |
| 30-Year Fixed FHA | 5.92% | 7.13% | +0.04% | +0.2% |
| 30-Year Fixed VA | 6.05% | 6.21% | +0.03% | +0.25% |
| 30-Year Fixed USDA | 6% | 6.16% | +0.06% | +0.18% |
| 30-Year Fixed Jumbo | 6.8% | 6.81% | -0.04% | +0.15% |
| 5/6 Year ARM | 6.05% | 6.09% | -0.02% | +0.08% |
Refinance Rates
| Loan Type | Rate | APR | Daily Change | Monthly Change |
|---|---|---|---|---|
| 30-Year Fixed | 6.61% | 6.64% | +0.02% | +0.17% |
| 15-Year Fixed | 5.69% | 5.73% | +0.02% | +0.18% |
| 30-Year Fixed FHA | 5.92% | 7.12% | +0.04% | +0.21% |
| 30-Year Fixed VA | 6.06% | 6.21% | +0.04% | +0.29% |
| 5/6 Year ARM | 6.2% | 6.24% | +0.09% | +0.19% |
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
April's price indices (the CPI, PPI, IPI and PCE) tend to lend 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."
Mortgage rates today
There are four economic reports on today's MarketWatch economic calendar. But only one warrants an analysts' consensus forecast on which market expectations are based.
Even that one, May's Chicago business barometer, rarely affects mortgage rates. So, the other three are even less likely to have an impact.
Markets expect the Chicago barometer, which is a purchasing managers' index (PMI), to improve to 50.8 from 49.2 in April.
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.
Next Friday brings the official monthly jobs report, which is often the most influential of all economic reports. Earlier that week, we're due other employment data and a couple of important PMIs.
