Mortgage Rate News

There’s no way to sugarcoat the situation in the bond market and, by extension, the mortgage and housing markets. Rates have risen at a nearly unprecedented pace, ushering in one of the quickest cooldowns on record. One of the only ways to find hope in this environment is to imagine that bad news is finite. To be clear, “bad news” is relative, because it has been the resilience of the domestic economy that has allowed rates to rise as aggressively as they have so far.  This isn’t necessarily a direct relationship, but the Fed is looking for a few pieces of evidence that its unfriendly policies are having the desired effect, and one of those pieces would be rising unemployment.   So far, unemployment has remained low, inflation has remained high, and the Fed has remained very unfriendly toward rates.  They’ve been so unfriendly that market participants have increasingly wondered how much they can get away with before signs of uncommon stress show up in rate markets and elsewhere. We may have witnessed some of that stress this week–especially in the second half which saw longer-term rates surge higher without any obvious provocation.  At this point, we should distinguish between longer term rates (like 10yr Treasury yields or mortgages) and shorter term rates (like a 2yr Treasury or the Fed Funds Rate).  Differences in the behavior between long and short term rates can offer clues about market psychology. In the 2nd half of the week short term yields moved higher, faster at first.  When shorter-term yields are rising faster in 2022, it often goes hand in hand with the perception that the Fed will be hiking its Fed Funds Rate faster.  To illustrate this point, here’s a quick look at the relative movement in 2yr Treasury yields and Fed Funds Rate predictions for September 2023. Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10222022

Let’s talk about exactly what it means to see a mortgage rate headline in the news, or even from some seemingly official index or survey.  In fact, let’s start with rate quotes themselves.  There are several ways of doing it and several reasons what you see might not be exactly what you get, even if the entity responsible for the quote is not intentionally trying to mislead you.  A competent loan officer should be able to explain to you why that is. One common reason is that an advertised rate will be a best case scenario, and your scenario might not be best case.  Additionally rates can change so much, so quickly these days that the electronic mechanism that keeps advertised rates up to date may not have caught up to reality.  This is especially problematic for anyone advertising rates on TV or radio, which apparently is still a thing at times.  Even by the time you’ve actually gotten a preapproval from a lender, your terms are not guaranteed until you actually have a lock agreement.  Your lender may have quoted you a rate with 110% honesty and transparency, but if you didn’t lock it at that moment, there’s a good chance that rates will have moved higher the next time you speak to them, even if it’s only an hour or two later.  Waiting a day or more to decide?  Forget about it.   Am I being overly dramatic?  Anyone working in the mortgage industry right now will tell you I’m not being nearly dramatic enough.  With the exception of those of us who are old enough to have actually been working in the industry in 1979-1981, no one has ever seen anything remotely like this.  To understand what I mean, check out the following chart. 

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10202022

There’s no sense in beating a dead horse or wading through another “same story, different day” assessment of rates. They were already at 20 year highs yesterday, so even a modest move higher would obviously enable the same claim.  And it ended up being more than modest.  New scapegoats for today’s move are in short supply.  Rate momentum is broadly negative.  Traders remain unwilling to catch the falling knife of bond prices (lower bond prices = higher rates, all other things being equal), and it will take a sustained shift in economic data and inflation to bring about a sustained shift in rates.   The average lender is now well into the 7s for top tier conventional 30yr fixed rate offerings–in many cases, mid-to-upper 7’s.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10192022

There’s no sense in beating a dead horse or wading through another “same story, different day” assessment of rates. They were already at 20 year highs yesterday, so even a modest move higher would obviously enable the same claim.  And it ended up being more than modest.  New scapegoats for today’s move are in short supply.  Rate momentum is broadly negative.  Traders remain unwilling to catch the falling knife of bond prices (lower bond prices = higher rates, all other things being equal), and it will take a sustained shift in economic data and inflation to bring about a sustained shift in rates.   The average lender is now well into the 7s for top tier conventional 30yr fixed rate offerings–in many cases, mid-to-upper 7’s.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10192022

Mortgage rates were generally unchanged today, but not without plenty of volatility in between.  Mortgage lenders would prefer to set their rates once per day in a perfect world, allowing the bond market an hour or two of active trading and then locking in their rate offerings around 10am Eastern time.  When bonds end up experiencing volatility, lenders are forced to “re-price” to higher or lower rates.  The average day of volatility tends to see those reprices occur in one wave and in one direction.  In other words, the bond market typically goes on one run of sufficient size to cause reprices on the days where it goes for a run at all. Recently, however, we’ve been seeing 2-3 runs a day resulting in a lot of back and forth on the part of mortgage lenders.  They’ll start the day in one place, raise rates by mid day, and then drop rates by the end of the day.  The overall count of intraday reprices has been much higher than normal and the split between positive and negative reprices has been even more abnormal.   Today was just another day in that regard with rates rising above yesterday’s levels by noon and then gradually dialing back by the close of business.  The average lender is ending the day roughly in line with yesterday’s levels to just slightly higher. [thirtyyearmortgagerates] [volatilityindex]

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10182022

Not only is the mortgage rate landscape vastly different than most of the past 20 years in terms of outright levels, but the way things change from day to day is unique as well.  In the past, we could generally observe broad-based changes from one day to the next.  If borrowing costs were rising for one rate, they were generally rising for all rates. That’s not always the case these days.  On many occasions recently, costs have moved higher for lower rates while simultaneously moving lower for higher rates.  If that is confusing, make sure you understand the following generalities:

Rates are typically offered in 0.125 increments (i.e. 7.0, 7.125, 7.25, etc)

There is a cost associated with each of those rates

The “next higher” rate generally has a lower cost for the borrower

“cost” can be positive or negative at closing.  In other words, a rate that’s high enough allows lenders to pay certain closing costs and avoid charging origination fees

With the rapid rise in rates in 2022, the underlying market structure that allows lenders to offer lower costs at higher rates simply hasn’t been ready to accommodate the flood of higher rate loans.  Time and stability help thaw that liquidity.  This means that costs may remain fairly flat at lower rates while improving gradually at higher rates. This also affects conventional and FHA/VA loans very differently with the latter being slower to see the thaw in higher rates.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10172022

Unsurprisingly, the market remains intently focused on inflation as the key driver of Fed policy and rate volatility. This week, the biggest inflation report combined with more UK market drama to push rates to another 20yr high. The UK doesn’t typically factor into our assessment of market movement in the US, but the past 3 weeks have been a notable exception.  The following chart shows how much bigger the move has been overseas.  Viewed in this light, US rates look almost resilient.  Resilience may have been in better supply were it not for this week’s much-anticipated release of the Consumer Price Index (CPI), the most influential monthly report on inflation and, indeed, the most influential of all the economic reports given the current preoccupation with the I-word.  Rates were near their best levels of the week before CPI, but quickly spiked in its wake. CPI caused rates to spike because it showed inflation was even higher than the already-high expectations. The more important “core” CPI made a particularly troubling move back up to the highest levels in decades. Bonds/rates don’t like inflation anyway, but they really don’t like it in 2022 when inflation is high enough to fuel the most aggressive Fed rate hike campaign since the 80s.  This report alone was responsible for bumping the Fed’s rate hike outlook to nearly 5.0% by the middle of next year. It’s not just rates that suffer from Fed rate hikes.  Stocks also tend to take a hit when the Fed enacts tougher policies or when economic data looks like it will add to the Fed’s austerity.  This combination of “suggestion” from the data and “confirmation” from the Fed is the thesis for 2022.  Massive losses in stocks and bonds are the conclusions.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10152022

There was no way to be sure what the effect of today’s economic data would be on mortgage rates.  All we knew is that the Consumer Price Index (CPI) would be released at 8:30am ET and that CPI releases have been the biggest sources of volatility for interest rates in 2022 and especially since June.   If you’re wondering what CPI has to do with mortgage rates, here’s a quick run-down:

mortgage rates are based on trading levels in bonds

bonds care a lot about inflation and about Fed policy

Fed policy is more likely to be less friendly to rates if inflation is higher than expected

CPI is the biggest inflation revelation on any given month

Case in point, the following chart shows the market’s expectations for the Fed Funds rate, both at the December 2022 and June 2023 Fed meetings.  CPI reports have been at ground zero for most of the big moves. As we often like to remind our readers, the Fed Funds Rate is not the same as mortgage rates, but longer-term Fed rate hike expectations (which is what’s in the chart above) correlate much more readily with longer-term consumer rates such as those for mortgages.  At the very least, big moves tend to be big moves in either case. The same correlation held true after this morning’s CPI came in hotter than expected.  In other words, mortgage rates surged to new 20 year highs this morning. Now, you may be wondering why higher inflation is such a surprise if all anyone seems to be talking about on the topic of inflation is how damn high it is.  But when it comes to the bond market, traders have long since priced in everything that was already known and assumed about inflation.  Today’s CPI data brought NEW information to light.  If CPI had been right in line with the average economist’s forecast, it may not have garnered much of a response from the market.  But it came in higher than forecasts, and that was a rude awakening for bonds.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10132022

Mortgage rates ended the day at slightly lower levels compared to the close of business yesterday.  That’s the first time rates have fallen day-over-day since October 4th, and it almost didn’t happen. The average lender was offering slightly higher rates this morning as the bond market deteriorated modestly in the overnight trading.  Bonds dictate day-to-day interest rate movement.  Mortgage rates are typically only adjusted once per day if the market is calm, but if there’s enough movement, mortgage lenders can “reprice” for better or worse. Thankfully, bonds improved as the day progressed and many lenders were able to reprice to slightly lower rates.  That said, we’re still in very high territory historically, but just a bit lower than we were yesterday afternoon or this morning. From here, attention fully turns to Thursday morning’s Consumer Price Index (CPI), a key monthly inflation report and consistently one of the most consequential events for interest rate volatility in 2022.  There’s no guarantee that Thursday’s report will have a major impact, but it certainly has the potential depending on the results.

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10122022

For many of the holidays in the US bond market, relevant overseas bond markets are also closed.  The opposite is true on several occasions with Indigenous Peoples Day being one of them.   In other words, the rest of the world was free to trade bonds as normal on Monday while the US was limited strictly to the electronic futures market.  But what does any of this has to do with mortgage rates?   Mortgage rates are based on the movement in mortgage-backed-securities (MBS, also closed yesterday).  MBS almost always move in the same direction and in roughly similar proportion to certain US Treasury yields–the core of the US bond market.  US Treasuries, in turn, frequently take cues from overseas bond markets, even if they are just as likely to march to their own beat during domestic hours. With all that in mind, Treasury futures took a beating on Monday as the UK bond market once again traded in panic mode.  The high rate implications were still in place as of Tuesday’s overnight trading.  10yr Treasury yields broke above 4.0% yet again and continued struggling to move much lower until later in the trading day. The weaker opening levels resulted in mortgage rates remaining at long term highs, but they would have been higher highs had it not been for an admirable show of support in the bond market.  In fact, by the afternoon hours, Treasuries and MBS were both very close to the same territory seen on Friday afternoon–effectively holding recent ceilings albeit with just a bit of overrun. 

Read more here: https://www.mortgagenewsdaily.com/markets/mortgage-rates-10112022