Mortgage Rates Today, November 2, 2026: Rates Remain in a Strong Position

The bigger picture

Last Friday was another good day for mortgage rates. Why? "Treasuries once again demonstrated the classic safe haven quality for the asset class during the overnight session as 10-year yields dropped on further equity market wobbles," Ian Lyngen, head of U.S. rates strategy at BMO, told MarketWatch.

In other words, investors were spooked by the AI sell-off in stock markets and sought relative safety in bond markets. Mortgage rates are largely determined by yields on a type of bond, the mortgage-backed security (MBS), and MBSs' yields often shadow yields on the 10-year U.S. Treasurys to which Lyngen refers.

Scroll on down for much more on the forces affecting mortgage rates today, including the two important economic reports on this morning's calendar.

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What's coming up?

Normally, economic reports are the main drivers of changes to mortgage rates. But these are not normal times.

And typically, only blockbuster reports, mostly concerning employment and inflation, have had an appreciable impact over much of this year. More important have been the general mood in markets and economically consequential news. News items concerning the war, employment, inflation, tariffs, and deficit funding are especially influential at the moment.

The Fed

On Wednesday, Oct. 28, the Federal Reserve's rate-setting body (the Federal Open Market Committee or FOMC) voted 10-2 to hold the federal funds rate steady. That rate affects almost all variable-rate borrowing.

The FOMC hiked general interest rates for the first time in three years at its previous meeting on Sep. 16 with a unanimous vote. But official Fed documents (especially the dot plot) revealed that FOMC members were deeply divided over what should come next.

"Sixteen of 19 officials expect another increase at either their October or December meeting," reported MarketWatch soon after the September meeting. "For next year, 10 officials signaled they see no more moves, but eight officials are penciling in another quarter-point increase."

Such small majorities within the FOMC suggest the number and timing of future rate hikes will likely be driven by key data: inflation and employment reports in the coming months. The Fed's dual mandates are to keep inflation around 2% (something it has failed to achieve over the last five years) and to maintain healthy employment levels.

Unfortunately, we think it is likely that inflation will remain elevated well into 2027, even if the Iran war ends soon — which is looking increasingly unlikely. We suspect the global oil market is in such bad shape that gas and diesel prices will take a long time to fall back to anything close to pre-war levels. More on that below.

Last night, the CME FedWatch tool put the chances of a hike at the FOMC's next meeting on Dec. 19 at 70.7%, down from Thursday evening's 74.9%. However, be aware that the tool often contains plenty of wishful thinking this far out from Fed meetings, and tends to get more realistic closer to each event.

The FOMC 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, usually ahead of Fed rate-change announcements.

The war

Although we don't hear much about it, Iranian and Houthi action around the Strait of Hormuz and in Saudi Arabia continues. "Iran's Revolutionary Guards Navy said on Friday that four oil tankers had caught fire and ​exploded in the Strait of Hormuz, while attempting to use what it described as ‌unauthorised routes, Iranian state media reported," according to Reuters on Oct. 30. "In its latest statement, the IRGC Navy said a fourth vessel, a tanker carrying more than 2 million barrels of crude oil, had hit a mine, suffered a powerful explosion and ​was burning."

Recently, the White House and Pentagon have been ramping up U.S. threats to Iran. "US President Donald Trump addressed overnight on Sunday the possibility of an additional military strike in Iran, claiming the United States is capable of hitting what remains of the Iranian nuclear program 'in just ten minutes,'" reported The Jerusalem Post on Sunday, Nov. 1. "Trump discussed options for resuming military operations with senior military commanders, including a meeting with CENTCOM commander Admiral Brad Cooper, Defense Secretary Pete Hegseth, and Chairman of the Joint Chiefs of Staff General Dan Caine."

Meanwhile, U.S. Ambassador to the United Nations Mike Waltz warned that the war could last another year, reported The Financial Times on Oct. 22, although he said he hoped for an earlier resolution through peace talks.

One possibility is that the U.S. will use bunker-buster bombs to obliterate Iran's nuclear program (perhaps as soon as this week), declare victory, and then immediately walk away. However, the president has plenty of options

"The US is dispatching roughly 9,000 sailors and Marines aboard a flotilla of warships to the Middle East, a major naval buildup that could bring three American aircraft carriers to the region by late October or November as President Donald Trump warns that renewed strikes against Iran remain possible," reported Gulf News back on Oct. 2. There are already 50,000 U.S. troops in theater.

Iran's forces comprise 640,000 regular troops and 350,000 reservists. Of course, U.S. troops are far better armed, trained, and equipped. But we suspect that the likely cost in blood and treasure will make any American president hesitate before launching a full-scale land invasion.

So, we're guessing the Pentagon intends to mostly continue relying on airstrikes, with additional ground forces only in limited roles, if any. Seizing Kharg and Qeshm Islands seems one possibility.

The U.S. force surge may also be used to help Saudi Arabia, which, for some weeks, has been struggling to resist escalating attacks by Iranian-backed Houthi rebels, who are based in neighboring Yemen. On Oct. 30, Al Jazeera reported Houthis claims of six attacks on Saudi airports and oil facilities.

Oil prices remain high by normal standards. The price of global benchmark Brent crude yesterday was $113.43 a barrel, down from Thursday night's $115.21.

The war, oil prices, inflation and mortgage rates

Mortgage rates respond to war news because a prolonged full or partial closure of the Strait of Hormuz could again choke off up to 20% of the world's oil supply, putting additional pressure on gas, diesel, fertilizer, and many other prices. It would take years to build the infrastructure necessary to bypass the Strait completely.

As Iran has escalated its attacks on tankers in the Strait of Hormuz, and its Houthi allies have increased airstrikes on Saudi Arabia, the global oil industry has come under increasing strain. True, oil prices are high, but some of that strain is due to refinery issues (see below) and market manipulations by governments and suppliers.

Strategic petroleum reserves in the U.S. and elsewhere are at multi-decade lows, leaving less room to cushion consumers from rising gas prices. It may not feel like it, but this method of suppressing pump prices has been in place almost since the conflict began. And some observers worry that it will grow increasingly difficult to access remaining inventory for technical extraction reasons.

The U.S. Energy Information Administration (EIA) says strategic petroleum reserve crude inventories fell to 282,583,000 barrels for the week ending Oct. 23. That it was virtually unchanged from the previous three weeks' readings might be significant. In any event, these latest figures mark the lowest level since 1982. The reserve stood at 415,064,000 barrels before the Iran conflict began, well below its 2011 peak of 726,531,000 barrels.

"There aren’t any more inventories to drain in the West," Russell Hardy, chief executive officer of Vitol Group, said at the Energy Intelligence Forum in London, according to Rigzone on Oct. 6. "We drained the available inventory." Vitol is the world’s largest independent oil trader, and Hardy's assessment might explain why the EIA's latest inventory figures continue to plateau.

"Hardy also warned that a tight fuels market is likely to persist in the coming months," continued Rigzone. "'Products are still in a very, very tight situation and that will probably roll forward for a little bit longer as we go through winter,' he said."

Rising fuel prices tend to drive up mortgage rates because they're inflationary. Those rates are largely determined by a type of bond, the mortgage-backed security. And bond purchasers are wary of buying bonds when inflation is too warm because increasing prices eat into the value of the fixed incomes that bonds deliver.

The refinery problem

"Consumers don’t buy crude oil. They buy gasoline, jet fuel and diesel," Andy Lipow, president of Lipow Oil Associates in Houston, told The Wall Street Journal on Oct. 5. "'As a result of missile and drone strikes in the Middle East, several large refineries have been damaged. The world finds itself short of refined products.'

"The recovery [if any] in oil flows out of the Strait of Hormuz won’t fix the problem anytime soon," continued The Journal. Flows at that time included only about half the refined products that used to pass through the Strait: 11% of overall flows rather than the pre-war 20%+.

That's because many oil refineries in the Middle East are out of commission due to damage from the Iranian war. Unfortunately, the exact same thing is happening in Russia owing to drone and airstrikes on its refineries by Ukraine. So, the world is very short of refined oil products.

Regardless of oil prices, the refinery crisis has so far translated into gas prices that are dramatically higher than a year ago, alongside diesel prices that have been frequently setting record highs. However, both have dropped by many cents a gallon over the last month.

Why those falls? There is some evidence that American consumers have been driving less over the summer. So, it may be that pump prices have fallen in response to a drop in demand rather than an increase in supply — or possibly a combination of both.

Of course, a lack of refining capacity exacerbates rather than moderates supply issues for consumers and businesses, as long as demand remains fairly steady.

Refinery economics

In his Substack post on Aug. 13, Nobel Prize-winning economist Paul Krugman backed up what we've been saying for some months. He referred to the "crack spread," which is the difference between the price of a barrel of crude oil and that for a barrel of "cracked" (aka refined) oil products, which he said had exploded by about $35 since the start of the Iran conflict.

"So, while the price of a barrel of crude is up around $25, the price of the products refined from that barrel is up about 25+35=60 dollars per barrel," wrote Krugman.

Why? "The shortage of refining capacity has, in turn, held crude prices down: Buyers aren’t willing to pay extremely high prices for crude oil they can’t refine," continued Krugman. "Or to put it a different but equivalent way, the cutoff of oil shipments through the Strait of Hormuz in effect required a large rise in global oil prices to ration demand, but much of that rationing has taken place through a rise in the crack spread rather than a rise in crude oil prices."

On Sept. 23, Torsten Slok, Apollo's chief economist, explained in an e-newsletter why diesel is such an issue: "The US Gulf Coast diesel crack spread cleared $100/bbl. for the first time on record in August against a normal range of $15 to $30," he wrote. "Unlike a gasoline spike, which lands on consumers as a one-time tax on discretionary spending, diesel is an intermediate input embedded in the delivered cost of nearly every physical good, from freight and rail to agriculture and construction.

"That means the rise in diesel prices does not stay in the energy line of the CPI [consumer price index] but migrates with a lag into core goods and services, which is exactly the kind of pass-through the Fed cannot dismiss as transitory," Slok continued. In other words, it creates sticky inflation that's hard to clean up.

The crack spread goes up and down, like oil and other commodity prices. On Oct. 31, RBN Energy put the crack spread globally (as opposed to the U.S. Gulf Coast specifically) at $55.68, much higher than the amount in August when Krugman did his calculations.

No wonder The Financial Times wrote on Oct. 8, "Crude futures [what most people call oil prices] are no longer a reliable guide to the inflationary impact of fuel prices."

Of course, any sudden good news from the Middle East could still send mortgage rates tumbling, regardless of that day's economic reports. Unfortunately, sudden bad news could send them 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."

More recently, bond yields (and mortgage rates) have risen on concerns about the level of government debt, too.

Mortgage rates today

There are two important economic reports on today's MarketWatch economic calendar.

The October purchasing managers' index (PMI) for the manufacturing sector from the Institute for Supply Management (ISM) is probably the more likely to affect mortgage rates. However, we'll be surprised if either of today's reports makes much difference.

Here are what markets are expecting from this morning's reports:

• October ISM PMI for the manufacturing sector — Markets expect the index to hold steady at 54.5, unchanged from the previous reading
• September construction spending — Markets expect construction spending to have risen by 0.4% that month, more slowly than August's 0.9% rise

A second PMI, also for manufacturing in October, is due this morning. However, this is from S&P Global and its PMIs tend to be less influential than those from the ISM, to the extent that MarketWatch doesn't publish market expectations for S&P Global ones..

What's next?

Strap in for Friday's jobs report for October. Most months, jobs reports are the most consequential economic releases for mortgage rates.

We're due PMIs for the services sector on Wednesday, along with the ADP national employment report, which records changes only in the private sector's labor market. ADP reports are nothing like as crucial as official jobs reports, but can move mortgage rates if they're perceived as bellwethers for the big event.

Friday also brings the first reading of consumer sentiment in November, but we suspect that might be swamped by reactions to that day's jobs report.

The results of the midterms might be seismic (or not) politically, but we doubt they'll effect mortgage rates much. Historically, markets have typically shrugged them off.

That's true, even when the House or Senate changes hands. Investors rather like gridlock. It brings fewer surprises.