Jackson Hole Sent Rates to 3-Week Highs. FHA and VA Buyers Barely Noticed

The average top-tier 30-year fixed rate is 6.81% per Mortgage News Daily, the highest reading in just over three weeks. The culprit was Friday's Jackson Hole speech, where the new Fed chair talked tough on inflation and the bond market took him at his word. That is the headline. The part most headlines skipped: FHA and VA rates are sitting at 6.37%, nearly half a point below the conventional average, and that gap is where the real money is for a lot of buyers right now.

What Warsh said, and why the market cared

Last Monday I wrote that Jackson Hole was the event to watch, and it delivered. Fed Chair Kevin Warsh used his first keynote at the symposium to say, in effect, that inflation is still too high and the Fed intends to get it back to its 2.0% target. The inflation gauge the Fed watches, the PCE price index, is currently running at 3.7% annually. Even the most charitable ways of slicing that number put it in the mid 2s, so there is real distance between where prices are and where the Fed wants them.

The market read the speech as hawkish, bonds sold off within minutes, and by Friday afternoon the average lender had repriced upward. The 30-year fixed went from roughly flat on the week to 6.81%, up 0.06 on the day and the highest in a little over three weeks. This is exactly the kind of single-event move I flagged as possible last week. Nobody could have told you the direction in advance, and I said as much then.

How bad is 6.81% really?

Some perspective before anyone panics. The 52-week range runs from 5.99% to 6.85%, so 6.81% is near the top of the past year's band, about four hundredths from the high. But the move from the prior Friday was 0.04, and Freddie Mac's weekly survey, which lags the daily index, still shows 6.66%. This was a jump, not a moonshot. Rates have visited this neighborhood twice this summer and drifted back down both times. That is an observation about the past, not a promise about the future, and I do not make rate predictions.

The more useful question is what the number does to a payment, and whether you are actually stuck paying it. Which brings me to the gap.

The quiet story: FHA and VA loans near 6.37%

While the conventional 30-year average sits at 6.81%, the national FHA and VA averages are both at 6.37%. That is a spread of 0.44%, which is enormous by historical standards. Here is what it looks like on a $450,000 loan, principal and interest only, 30-year term:

• At the 6.81% conventional average, the payment is about $2,937 a month.
• At 6.375%, the conventional rate posted today on my live rates page, it is about $2,807.
• That gap is roughly $129 a month, or about $1,551 a year, on the same loan just by shopping instead of taking the average.
• A VA loan at 6.37% pencils out to about $2,806, and VA loans carry no monthly mortgage insurance at all.

Two caveats so this stays honest. FHA loans add a monthly mortgage insurance premium on top of principal and interest, so the all-in FHA payment is higher than the rate alone suggests, and whether FHA beats conventional depends on your down payment and credit score. And VA loans are limited to eligible veterans, active-duty service members, and certain surviving spouses. But if you are VA eligible and you have been quoted a conventional rate in the high 6s, you owe it to yourself to run both. The VA program is often the best-priced loan in the entire market, and weeks like this one make the gap wider, not narrower.

What is on the calendar this week

The market's next big test comes Friday with the August jobs report. Employment data has been the main driver of rate moves all summer, and after a hawkish Fed speech, traders will be watching whether the labor market gives the Fed room to stay tough or a reason to soften. A weak report has historically pulled rates down and a strong one has pushed them up, but single reports surprise in both directions and I will not pretend to know which way this one breaks.

If you are floating a rate with a closing date inside the next 30 days, the framework from last week's post still applies, only now with less cushion: a rate you can afford beats a rate you might get. If your closing is further out, make sure you can genuinely absorb another move like Friday's before you decide to wait.

The bottom line

Jackson Hole gave the bond market a hawkish jolt and the 30-year fixed is at a 3-week high of 6.81%. You cannot control the Fed. You can control which loan program you use and which lender prices it, and right now those two choices are worth far more than the last two weeks of rate movement. Check the live rate I am posting today, see whether FHA or VA fits your situation, and if you want a straight answer on your specific numbers, my phone number is at the top of the page and I answer it personally. If you would rather watch and wait, join the free rate alert list and I will email you when the market moves enough to change your math.