Mortgage Rates Today, October 28 2026: It's Fed Day!

The bigger picture

Mortgage rates edged minimally lower yesterday, as markets remain transfixed by this afternoon's rate announcement by the Federal Reserve. Read Will the Fed Hike Rates on Wednesday? for more.

But, briefly, few are expecting a rate change today. Markets will, however, be looking for hints about what could happen at the Fed's next rate-setting meeting on Dec. 9. So, no change in the Fed rate doesn't necessarily mean no change in mortgage rates after the announcement at 2 p.m. Eastern this afternoon.

Scroll on down for much more on the forces affecting mortgage rates today. There are no major 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 Sep. 16, the Federal Reserve's rate-setting body (the Federal Open Market Committee or FOMC) hiked general interest rates for the first time in three years.

That vote was unanimous. But official Fed documents revealed that FOMC members are deeply divided over what comes next.

"Sixteen of 19 officials expect another increase at either their October or December meeting," reported MarketWatch soon after the 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.

Despite September's awful inflation reports, markets are increasingly confident that the FOMC won't hike general interest rates when it completes a two-day session at lunchtime. Its rate decision should be announced at 2 p.m. Eastern today.

Last night, the CME FedWatch put the chances of such a hike at just 6.6% (it had been 10.5% on Monday night), down from 15.5% a week earlier.

If the FOMC doesn't act today, the FedWatch tool reckons there's an 84.4% probability of a hike at the committee's following meeting on Dec. 9: 78.9% for a small, 25-basis-point (0.25%) increase and 5.5% for a larger 50-basis-point jump.

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

"Iran warned on Saturday that U.S. ships would never be allowed in the Persian Gulf 'under any circumstances,' as tensions between Tehran and Washington continue mounting," reported CBS News on Oct. 25. "Both sides have signaled a possible return to strikes, with the U.S. ambassador to Turkey warning Iran could be struck as soon as this weekend."

That didn't happen, perhaps because of fears in Israel that its parliamentary election yesterday would have to be postponed if strikes went ahead in advance of voting.

"Director of National Intelligence Jay Clayton warned Friday that Iran has 'substantially increased efforts to target U.S. personnel' abroad, with plots to kill Americans reaching 'advanced stages' in the Middle East and other countries," continued CBS News.

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

"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. CBS News reported explosions in the Saudi capital Riyadh on Oct. 25.

Oil prices moved higher on most September days. Last night, the price of global benchmark Brent crude was $113.88 a barrel, lower than Tuesday night's $115.13, perhaps because the threatened military action is yet to begin. "Oil prices rose Friday, closing out the week with solid gains as the market remains on edge about the possibility of the Middle East conflict escalating with renewed U.S.-Iran hostilities and further attacks on Saudi energy infrastructure," reported The Wall Street Journal on Oct. 23.

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.

"Iran's state television reported on Thursday that seven oil tankers were either struck by attacks or hit naval mines in the Strait of Hormuz overnight, possibly the largest single-day number of vessels damaged in the waterway since the Iran war started on Feb. 28," said PBS News on Oct. 22.

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. 16. That it was virtually unchanged from the previous two 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 (although the latter have dropped 18 cents a gallon since their all-time high on Sep. 22). That's because a lack of refining capacity exacerbates rather than moderates supply issues for consumers and businesses, while 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. 24, RBN Energy put the crack spread globally (as opposed to the U.S. Gulf Coast specifically) at $56.43, much lower than the $65.16 seen just days earlier, but 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.

Fifth Third's weekly economic preview

In an e-newsletter on Tuesday, Bill Adams, the chief U.S. economist for Fifth Third Bank, laid out his expectations for this week's economic reports.

He began by confirming how unlikely the thought it that the FOMC would hike rates. He continued by covering this week's other key economic reports, both of which are due on Thursday morning:

"Real GDP growth likely strengthened in the third quarter as businesses replenished inventories. Inventories spiked in the first quarter of 2025 as businesses aggressively purchased imports to front-run higher tariffs, and have been a headwind to growth since then. Real final sales to private domestic purchasers (a.k.a. core real GDP) will likely be little changed from the second quarter’s brisk pace.

"PCE inflation is forecast to accelerate in September on higher gas prices, with a smaller pickup of core PCE inflation excluding food and energy. Core PCE inflation was likely around 3% year over year. Monthly personal income and outlays data will likely show spending outpaced income growth again, pushing the saving rate down to the lowest since 2022. The saving rate is on a long-run downtrend, in part because of demographics—retirees are spending down savings—and in part because capital gains are an increasingly important driver of consumer spending power and are not counted in personal income. But over shorter time horizons like the last six or 12 months, the falling saving rate points to stress on household budgets, especially those of lower-income and rural households who are harder hit by rising gas and diesel prices."

Mortgage rates today

There are no important economic reports on today's MarketWatch economic calendar.

The three that are listed are all for September and comprise the advance U.S. trade balance in goods, and inventories for the wholesale and retail sectors. None of them warrant the publication of market expectations, which means they're highly unlikely to affect mortgage rates.

What's next?

Tomorrow should bring the Fed's favorite gauge of inflation (the PCE price index) and the first reading of gross domestic product (GDP) during the third (July-September) quarter.

Those could bring plenty of excitement for mortgage rates if they contain any significant surprises. Other economic reports this week are likely to have zero or minimal impact on those rates.