Mortgage Rate Watch


    Mortgage Rates Catch a Break Before Long Weekend

    Financial markets in the US will be closed for President's Day on Monday. Thus, mortgage lenders will not be open, nor will they be accepting locks. Given that mortgage rates took the road less traveled in 2018 and actually moved lower, it's worth having a chat with your mortgage professional if you have a loan in process. 

    Of course, many of you may not be reading this until after the lock window has passed for today, so let's take a look at next week's risks and opportunities.  The biggest risk is the same one that's been with us all year.  Simply put, rates have been trending higher in a steady but highly convicted fashion, quickly adding a half a percentage point or more to the average 30yr fixed rate quote.  As we've been saying all year, it doesn't make sense to bet against that trend until it shows clear signs of cooling, and today's modest improvement doesn't cut it.

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    Rates Hold Steady Despite Stock Gains

    Mortgage rates were roughly unchanged today.  Some lenders even offered improved rates in the afternoon as underlying bond markets managed to hold modest gains.  All this despite another winning day for stocks (5th in a row now).  Much has been made of the interaction between stocks and bonds since last week's stock market flash crash.  Unfortunately many of the correlations mentioned in the news are fairly black and white.  

    For instance, many people believe that stock prices and bond yields move higher together because a growing economy not only implies stronger stock performance, but it can also support higher rates.

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    Things Just Keep Getting Worse For Mortgage Rates

    Mortgage rates surged higher today, moving easily to new 4-year highs.  Today's average conventional 30yr fixed rate is roughly one eighth of a percentage point higher than Wednesday of last week and more than half a point higher than the best rates seen in January.  A half point increase would cost roughly $90/mo in terms of monthly payments on a $300k loan.  In terms of actual "note rates" being quoted, 4.625% is now replacing 4.5% as the most prevalent quote on top tier scenarios.  That said, it's worth noting that there's a fair amount of variability from lender-to-lender and day-to-day at the moment.  This is typical for market conditions we're currently enduring.

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    Mortgage Rates Ready to Move After Tomorrow's Inflation Data

    Mortgage rates began the day fairly well in line with the past 2 days.  While it's nice to see some stability in this environment, it's not so nice that it's occurring at 4-year highs.  Do we have a shot at moving much lower or should you brace for more?  What warning signs should you look for to help answer that question?

    Much has been made in the news recently about the correlation between stocks and bonds (which dictate rates).  Depending on the day, stocks are said to be falling because rates are too high or rates are said to be rising because stocks are rising.  In reality, rates are largely doing their own thing, and that thing just happens to correlate with movement in stocks in general.  Last week's stock crash was a different story as it did actually help interest rates catch their collective breath.  

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    Mortgage Rates Steady at 4-Year Highs Despite Warning Shots

    Mortgage rates were generally in line with Friday's latest levels today.  Unfortunately, those happened to be the highest in more than 4 years

    Rates are primarily determined by the prices and yields of bonds.  The bond market has increasingly been under pressure over the past four months for a few key reasons.  One of those reasons has to do with simple supply and demand.  The government issues bonds to supplement revenue or to pay for new spending (i.e. 2018's expected drop in tax revenue created the need to issue more debt).  More issuance (i.e. more "supply") creates lower bond prices and higher rates (prices and rates move inversely).

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    Mortgage Rates End Week in Line With 4-Year Highs

    Mortgage rates experienced some ups and downs this week (mostly ups), but ultimately weren't able to capitalize on a few attempts to move lower.  Monday's initial rate sheets were the highest in years, but they were soon superseded by afternoon improvements that followed the massive stock sell-off.  Rates will often improve during a day where stocks are panic-selling because panicked dollars need safe havens to hide out in.  The bond market (the thing that dictates rates) only got a small fraction of the safe-haven demand created by the stock rout.  Add the volatility and confusion into the mix and lenders weren't too interested in making huge changes to rate sheets.

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    Mortgage Rates Higher Still; Intraday Volatility Increasing

    Mortgage rates continued higher today, bringing the average 30yr fixed rate to another new multi-year high.  That said, rates may vary quite a bit from lender to lender for several reasons.  First, intraday volatility is back with a vengeance.  For much of 2017, lenders were less likely to change rates in the middle of the day than to simply leave the morning rate sheet intact through all the little ups and downs in bond markets.  Now that those ups and downs are getting bigger, lenders are much more willing to reissue rate sheets--sometimes several times a day.

    In today's case, rates began at the worst levels in more than 4 years, but mid-day bond market improvements allowed quite a few lenders to offer better rates in the early afternoon.  Those afternoon rates were thus slightly lower than "the highest in more than 4 years."

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    Mortgage Rates Jump Back Up to 4-Year Highs

    Mortgage rates surged higher today, with most lenders ending up back in line with the 4-year highs seen on Friday afternoon.  At issue--among other things--is the fact that the stock market has been unwilling to continue offering up a fresh supply of drama.  Earlier in the week, that drama helped rates bounce lower in a way that bordered on optimistic.  Even so, it didn't make much sense to get too hopeful, which is why we noted that any tactical opportunities to float one's rate had passed as of yesterday. 

    There was actually some room for hope earlier this morning, but it didn't last long.  Without ongoing stock losses, bonds (which dictate rates) just aren't interested in going against the prevailing momentum yet.  A somewhat poorly-received Treasury auction in the afternoon kicked the weakness into high gear.  In other words, investors weren't eager to buy 10yr US Treasury debt below 2.80%.  Lower investor demand for longer-term bonds means prices move lower, and lower bond prices mean higher rates.

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    Mortgage Rates Head Back Toward Recent Highs

    Mortgage rates were mixed today, with most lenders offering slightly better terms this morning compared to yesterday's mid-day levels.  Things took a turn for the worse in the afternoon as the stock market recovery pulled money back out of bonds.  Lower demand for bonds results in rates moving higher, all else being equal.

    With so much focus on stocks over the past two days, the following bears repeating: stocks and bonds are not reliable predictors of each other's movement.  Yes, we definitely saw stocks have a clear influence on bonds and rates yesterday, but that isn't always going to be the case.  It's worth noting that 10yr bond futures prices didn't move any more than 1.5% in response to more than a 7% drop in S&P futures. 

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    Mortgage Rates Catch a Break After Stock Market Rout

    Mortgage rates caught a break today, moving back near last Thursday's levels as bonds (which underlie rates) benefited from today's extreme market volatility.  It's a common misconception that interest rates and stocks always follow each other.  While this is often true over shorter time horizons, the opposite tends to be true in the long run.  Moreover, there are numerous examples of shorter-term moves that also suggest the opposite.  As recently as last week, higher rates were being blamed for stock market weakness, but today's sharp drop in rates did nothing to soothe the significantly sharper drop in stocks.

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    You Thought Yesterday Was Bad For Mortgage Rates?

    If you thought yesterday was bad for mortgage rates, you're probably not going to be a big fan of today either.  And since today is the end of a week, we could similarly say you won't like this week if you didn't like the previous example.  That's been true all year so far.  And hey!  Those week's add up to a month (we'll give yesterday and today a pass and consider them to be in the first month of 2018) so we can also say if you didn't like the last month of 2017, you're really going to hate the first month of 2018. 

    So what's going on?  Nothing outside the ordinary.  The only problem is that "the ordinary" has involved bond market participants looking for almost every opportunity to sell bonds, thus pushing rates higher.  Today's focal point was the big jobs report in the morning.  This data traditionally packs a big punch but it hasn't been a big market mover recently.  That appeared to change today, but the rate spike had more to do with the fact that traders were intent on pushing rates higher anyway and simply waiting to make sure the jobs data didn't throw a wrench in the works.  Granted, there was no way to know this would happen before it happened, but in any event, our default stance has been to assume rates will continue higher until they give us clear evidence to the contrary.  Needless to say, we're nowhere close to amassing any such evidence after days like today.

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    Mortgage Rates in Big Trouble

    Mortgage rates are in big trouble.  Whatever you've read about the current spike so far today, you'll probably need to double it after today's bond market movement.  Why?  Because most news stories on rates haven't yet accounted for today's bond market movement!  The most prevalent source material is Freddie Mac's weekly survey which generally tracks lender quotes from Monday and Tuesday of any given week.  The survey showed a 0.07% jump week over week. 

    The actual jump is more like 0.12-.13.  The average lender is now quoting 4.375% on top tier 30yr fixed scenarios.  More than a few are already up to 4.5%.  Lenders quoting rates much lower are likely doing so at the expense of profit margins and that could create sustainability concerns.  Moreover, unless you're interacting directly with someone who is in a position to lock a mortgage rate for you right then and there, there's really no guarantee that the information informing any given opinion on rates is still current.  In other words, things have been moving quickly.  Just because your realtor's mortgage lender friend could easily quote one rate a few hours ago doesn't mean that rate is available now.  Keep the volatility in mind if you happen to have a loan in process.

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    Mortgage Rates Hold Steady Despite Upbeat Fed

    Mortgage rates managed to hold steady today, on average (some lenders were slightly better while others were slightly worse) despite a more upbeat economic assessment from The Federal Reserve.  The Fed releases a statement on monetary policy 8 times a year.  These statements let markets know what the Fed is thinking and how it is planning on approaching policy in the future.  They also serve as venues to announce changes in the Fed's policy rate, the "Fed Funds Rate," which has a bearing on almost all other rates (including mortgages).

    The Fed wasn't expected to hike rates with today's statement, and this wasn't one of the 4 meetings a year where they release updated forecasts.

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    Mortgage Rates Still on a Scary Ride

    Mortgage rates continued just slightly higher today.  While it wasn't the worst day they've had in terms of movement, it arrives as rates were already pushing the highest levels in more than 3 years.  In that sense, it's like a few nerve-racking moments in the dark on some scary amusement park ride.  You know it's probably not over and that there are probably scarier moments to come.  Even if the scariest moments are behind you, that won't become apparent until you're officially off the ride.  Within the scope of that analogy, mortgage rates are still very much strapped in.

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    Mortgage Rates Surge to Highest Levels in More Than 3 Years

    Mortgage rates are in trouble.  This will come as no surprise to regular readers.  For the past few weeks, rates made several successive runs up to the highest levels in more than 9 months.  It was really only the spring of 2017 that stood in the way of rates being the highest since early 2014.  After Friday marked another "highest in 9 months" day, it would only have taken a moderate movement to break into the "3+ year" territory.  The move ended up being even bigger.

    From a week and a half ago, most borrowers are now looking at another eighth of a percentage point higher in rate.  In total, rates are up the better part of half a point since December 15th.  This marks the only time rates have risen this much without having been at long term lows in the past year.  For example, late 2010, mid-2013, mid-2015, and late 2016 all saw sharper increases in rates overall, but each of those moves happened only 1-3 months after a long term rate low.

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