Mortgage Rate Watch


    Mortgage Rates Continue Much-Needed Recovery

    Mortgage rates have been more willing to move higher than lower recently.  While that may continue to be the case in the near-term future, there have been pockets of resistance to that trend.  The first 2 days of this week seem to be just such a pocket.

    The direction of the movement is good, but the magnitude may leave a bit to be desired, depending on your standards.  The average loan scenario would still be seeing the same "note rate" quote as yesterday, but the effective rate would be slightly better due to lower upfront borrowing costs. 

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    Mortgage Rates Avoid More Pain, Even if Only For Today

    Mortgage rates had a bad October.  November hasn't exactly been great either, with last Thursday being one of the worst days of the year in terms of day-over-day jumps in rates.  In addition to the abrupt move, last week's weakness also brought rates in line with their highest levels in more than 3 months.

    All of the above could be part of a bigger shift away from the prevailing trend toward lower rates (which had been intact since last November) and into a new trend of rising rates.  This newer, unfriendlier trend arguably tried to make an appearance in mid September but was quickly shut down as rates nearly returned to the super-long-term lows 

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    Mortgage Rates Holding Near 3-Month Highs

    Mortgage rates launched to their highest levels in more than 3 months yesterday for a variety of reasons.  Chief among them was a series of comments from both China and the US about the intent to cancel previously announced tariffs as a part of the phase 1 trade deal.  Tariffs and trade have been weighing on the economic outlook in a big way, and that's benefited interest rates.  Anything that lessens the weight has the opposite effect.

    Notably, the bond market failed to improve very much today even after Trump said that there was no agreement to roll back tariffs yet, even though there was a clear reaction. 

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    Mortgage Rates Blasted by Trade Deal Progress

    Mortgage rates surged higher at a rapid pace for the second time this week.  Taken together, the jump is the biggest of its kind since the big rate spike in September, and one of only a handful of weeks in the past 3 years where lenders are quoting rates that are 0.25% higher than the previous week. 

    Progress on the US/China trade deal is the key culprit behind the volatility, but not the only factor.  In general, the bond market (which dictates rates) has been doing so well for so long that risks of a bounce have been increasing simply due to doubts as to how long the good times could continue to roll.  In market jargon, these motivations are referred to as "technical."   

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    Mortgage Rates Trying to Find a Ceiling

    Mortgage rates were sharply higher yesterday, but managed to reverse course and make some gains today.  The refreshing part of the improvement was that the bond market (which underlies rates) was already holding its ground before there was any obvious reason to do so.  Simply put, this suggests that investors could view current rates as being high enough to be considered a good buying opportunity.  That's a complicated way of saying rates could be running into a ceiling here.

    A word of caution though: it's never possible and seldom a good idea to read much into longer-term trends based on one day of bond market ...

     

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    Mortgage Rates Shoot Significantly Higher

    Mortgage rates were flat yesterday, but I warned that volatility could increase today.  That turned out to be an understatement.  Mortgage rates shot higher nearly as quickly as they'd moved lower last week.  In fact, the average lender is offering rates that are back in line with the recent highs seen last Monday.

    As far as rate movement goes, today's jump in rates is a bigger deal than last week's improvement because it takes us back to the highest levels since early August.  That's when the year's most abrupt drop began.  Shortly thereafter, I added the first bullet point in the list of lock/float considerations below.  Simply put, the rate rally was getting so big and had stuck around for long enough that we were increasingly forced to worry about it fizzling out.

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    Mortgage Rates Holding Gain, But Volatility Could Increase

    Mortgage rates were flat to slightly higher today after dropping at fairly quick pace last week.  In fact, if we're only examining one-day changes in rates, Thursday's drop was the quickest drop in months!  That may sound slightly more impressive than it is, however.  In terms of hard numbers, we're talking about roughly $22/month on a $300k loan.

    Most of those savings are still intact today, but the risk of volatility remains.  Tomorrow brings an important economic report on the services sector (one that has resulted in bond market movement more often than not in 2019).  If the numbers are stronger than expected, rates could move higher more quickly.  The exact opposite is typically true if the report were to come in weaker than expected, but it could take a few extra days to pan out this week due to the Treasury auction calendar.  Specifically, there are Treasury auctions on each of the next 3 days.  This is a normal, scheduled affair, but traders can be more tentative in the middle of such auction cycles.  

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    Mortgage Rates Steady Today, Much Lower This Week

    Mortgage rates held steady today after moving sharply lower yesterday. "Sharply," in this context, means that many lenders saw rates move lower by as much as an eighth of a percentage point versus the previous morning.  Changes of that magnitude are rarely seen in the space of 24-48 hours.  In fact, more often than not, entire weeks go by with a 0.125% change in average 30yr fixed rates. 

    The size and speed of the move is interesting in and of itself, but it's made more interesting by the fact that this week's most prevalent mortgage rate headlines claimed that rates were actually HIGHER.  Rest assured, that's not the case.  So what's with the misleading headlines? 

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    Mortgage Rates Dropping Like a Rock

    Mortgage rates dropped like a rock today.  This has absolutely nothing to do with yesterday's Fed rate cut, a little to do with the market reaction to the verbiage in yesterday's Fed announcement, and a lot to do with today's new developments.  Chinese officials were cited as questioning the viability of the much-touted trade deal overnight.  The trade deal is important to financial markets because it's thought to be an easy way to increase global economic growth--something that is typically bad for rates.  As such, the questioning of the deal was good for rates.

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    Mortgage Rates Little-Changed, But Could Improve Tomorrow

    First things first: the Fed cut its policy rate today, but that doesn't mean they cut mortgage rates.  Why?  Because they can't and they don't--especially not by a whopping 0.25% in a day (an amount that may be seen once or twice per decade when it comes to a single day's change in mortgage rates).  Case in point, mortgage rates for almost any lender are almost exactly where they were yesterday.

    All that having been said, the Fed does SAY things that are important to the bond market that underlies rates.  That verbiage can always push mortgage rates in either direction regardless of the direction that the Fed moves its own policy rate. 

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    Yes, The Fed Will Cut Rates, But Not Mortgage Rates

    You may have heard that the Federal Reserve is highly likely to cut rates this week. That is true. It's happening tomorrow. It would be a big surprise for financial markets if the Fed did NOT cut rates at this point.  You may be wondering if this means anything for mortgage rates or worse, you may actually be convinced that a Fed rate cut means lower mortgage rates.

    The only mortgage rates that have anything to do with the Fed Funds Rate (the thing the Fed cuts or hikes) are those associated with some home equity lines of credit (HELOCs).  But when it comes to 1st mortgages, and most 2nd mortgages, any impact from the Fed's rate cut has long since been felt.  That's because the bond market that dictates mortgage rates can move in real-time whereas the Fed only meets once every 6 weeks.  So if the market thinks a Fed rate cut is 100% likely, traders can trade bonds based on that assumption, and that's exactly what they've been doing for weeks and weeks.

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    Mortgage Rates Near 3-Month Highs

    Mortgage rates increased again today as lenders continued to get caught up with 2 days of bond market weakness.  When bonds are weaker, prices are moving lower and yields (aka "rates") are moving higher.  Rates have been rising in general for almost the entire month October after taking a another run at long-term lows.  The previous attempt (a successful one) saw rates hit the lowest levels in more than 3 years at the beginning of September.  

    With the early October lows representing a modest increase from the early September lows, there's a risk that a bigger-picture shift is taking place.  Simply put, the long-term trend of falling rates that began roughly 1 year ago could be in the process of shifting toward a trend of rising rates.  

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    Mortgage Rates Slightly Higher, As Expected

    Mortgage rates moved lower for 3 days in a row as of yesterday afternoon.  But that trend was likely to reverse based on the timing of yesterday's market movement.  Specifically, the market was suggesting mortgage lenders should raise their rates, but not quite urgently enough (or early enough in the day) for lenders to pull the trigger at the time.  As such, it was a strong possibility that we'd see lenders make those adjustments with today's first rate sheets.

    Things actually deteriorated a bit from there.  Once again, bond markets were unable to maintain modest improvement from the overnight trading session.  As bond prices move lower and yields move higher, lenders are increasingly forced to "reprice" their mortgage rate sheets (i.e. they change the rates they're offering in the middle of the business day).  Multiple lenders repriced for the worse today, bringing rates back up toward their highest levels in more than a month.

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    Mortgage Rates Fell Again, But There's a Catch

    Mortgage rates dropped at a modest pace for the 3rd straight day on Thursday.  This brings them back in line with levels seen at the end of last week.  That's notable because many media outlets--even some with a focus on mortgages and real estate--are running articles saying that rates are higher this week.  While it's true that rates WERE higher on Monday, they've quickly fallen back into line.

    The source of the confusion is the same as it ever was on any given Thursday during times of relatively higher volatility.  The vaunted Freddie Mac mortgage rate survey is an industry and news media benchmark.  It comes out every Thursday, but only captures rate quotes from Monday through Wednesday (with heavy weight given to Monday based on my observations and comparisons with average daily rates).  So if last week's rates were pretty OK on Monday and much higher the subsequent Monday, Freddie's survey will tell us rates are higher, regardless of the movement on the other days of the week. es in upfront costs into consideration.

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    Mortgage Rates Continue Recovering

    Mortgage rates moved a bit lower yesterday after hitting the highest levels in more than a month the day before.  They kept the positive trend going today with another modest improvement.  While this isn't enough to have a major impact on the cost of financing, the average prospective mortgage borrower would be seeing a small drop in upfront closing costs.  In other words, the changes aren't big enough to affect the interest rate itself and it's those upfront costs that allow for the fine-tuning adjustments that are more commonly seen from day-to-day.

    Today also happened to be relatively quiet when it comes to the data and events that have been driving interest rate volatility.  It's not that the bond market has lost interest in those factors--simply that there were in short supply or otherwise anticlimactic.  That could change tomorrow as we get the week's only serious day of domestic economic data.  Interest rates typically move higher in reaction to stronger-than-expected data and vice versa.

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