Mortgage rates are a touch better to start the week, moving back toward their best levels in a month.
The 30-year fixed is averaging close to 7.375%, down from recent highs of 7.625%.
While not great, it could be worse and there’s still hope rates can inch closer to the high 6s before the midterms.
In the meantime, the “win” will be avoiding any major setbacks that push us back toward recent highs.
And this is a loaded week, with another Fed meeting, a major inflation report, and Big Tech earnings all coming over the next few days.
Lower Oil Is Helping Mortgage Rates Today
Oil prices are lower today after surging on Friday, with Brent crude falling on hopes the situation with Iran improves or at least doesn’t escalate.
However, there’s also been chatter about strikes on Iran after the midterms, which are now just over a week away.
Oil remains above $100 a barrel, and that continues to be a problem because higher energy costs feed inflation, and bonds hate inflation.
That keeps upward pressure on bond yields and mortgage rates follow.
So until oil prices really settle down, any major relief for mortgage rates will likely prove elusive.
The Fed Could Impact Mortgage Rates This Week
The Fed wraps up its October meeting Wednesday afternoon, and while a rate hike looks very unlikely, what Fed chair Kevin Warsh says can still move mortgage rates.
As I always say, the Fed doesn’t control mortgage rates, but Fed rate expectations can certainly play a role.
The current odds of standing pat are nearly 90%, per CME. So nobody really expects any movement in the federal funds rate.
But they will be looking to Warsh for clues about what happens next and when another hike might come.
Perhaps he won’t want to rock the boat right before the midterms, though that’s just a guess on my part.
The bigger question is the December meeting, where markets are currently pricing in roughly a 73% chance of a hike.
That means Warsh’s press conference following the meeting will matter a lot more than the decision itself.
In other words, a hold here is expected and isn’t necessarily going to be good news for mortgage rates unless Warsh frames it as such.
If the Fed sounds like it’s backing off a December hike due to the recent stock market rout, bond yields (and mortgage rates) could head lower even with no policy change.
Thursday’s GDP and PCE Inflation Data May Reinforce Recent Trend
A day after the Fed meets, we get the first look at third quarter GDP, along with the September PCE report, which is the Fed’s preferred inflation gauge.
A favorable PCE report could take some pressure off bonds as well and also make a December hike a little less likely.
A hot report would do the opposite, so that’ll be the thing to keep an eye on this week.
Still, it’s just one report, but it does have the power to keep this recent mortgage rate rally going or pump the brakes.
Pay attention to whether the 10-year bond yield can stay under 5%, since that’s obviously a big threshold.
Does Tech Matter Most to Mortgage Rates Right Now?
I was having a conversation with another dad this weekend who follows the market closely.
I noted that the only thing that really got bond yields to stop rising was the tech stock selloff.
On the one hand, it’s troubling that nothing else seemed to work. On the other, there are still lots of levers that haven’t been pulled yet that could do the same.
The biggest one being some sort of positive development in the Middle East.
In the meantime, we have a lot of tech earnings this week, with Microsoft and Alphabet reporting Wednesday and Amazon on Thursday.
That will factor into mortgage rates because last week’s big bond rally was mostly about worries related to AI spending.
You aren’t necessarily rooting for major weakness there, but if those companies do report poor numbers, it’ll likely help mortgage rates move even lower from here.
Read on: Compare mortgage rates and monthly payments side by side with my mortgage rate calculator.
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