Mortgage Rate Watch
Mortgage Rates Lowest in a Week Tue, 23 Apr 2024 20:12:00 GMT
Mortgage rates are driven by day to day changes in the bond market.  Bonds are focused on the Fed and the economic data that shapes Fed decisions.  Today's data isn't necessarily big on the Fed's radar, but the market reacted due to its implications on other data. Specifically, the S&P Purchasing Managers Indices (PMIs) came in lower than expected for both the services and manufacturing sectors. PMIs can be thought of as fairly timely, general barometers for the economy because they ask the financial decision makers at businesses about the current state of affairs as well as future plans.   One of the topics concerns "prices" which is the hottest of hot buttons for rates these days.  On that note, the data mentioned lower price pressures in April due to a deterioration of demand and a slight softening in the labor market. S&P's PMIs aren't as big of a deal for rates as a similar set of PMIs published by the Institute for Supply Management (ISM), but we have to wait until next week for the latter.  The first mover advantage of today's data helped drive the reaction.  Thankfully, it was good for rates with the average lender moving down to the lowest levels since Friday, April 12th.
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Mortgage Rates Essentially Flat Just Under 5 Month Highs Mon, 22 Apr 2024 20:01:00 GMT
Mortgage rates began the new week at almost exactly the same levels seen at the end of last week.  There were no major events or economic reports to cause volatility in the underlying bond market, but bonds were able to improve modestly by the end of the day. In general, bond market improvement leads to lower rates.  The catch, in this case, is the improvement was fairly small and that it was offset to some extent by modest weakness earlier in the day.  Even so, a handful of lenders offered mid-day improvements.  Other lenders will technically be more likely to improve tomorrow morning if bond market trading levels are unchanged (and that's not something that can be guaranteed or even assigned better than a 50% probability). By staying near Friday's levels, the average lender is just shy of the highest rates in 5 months.  A top tier conventional 30yr fixed scenario is still in the mid 7% range. Volatility will definitely be higher next week due to the calendar of events, but it could start increasing in the coming days as well.  There's no directional connotation to "volatility."  It's an inherent 2-way street.  The direction of the movement will depend on the tenor of the data.  It looks like rates are at least willing to treat current levels as a ceiling, but only if we finally see some friendlier data--something that's been hard to come by since February.
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The Case of The Disappearing Rate Cuts Fri, 19 Apr 2024 20:30:00 GMT
The Fed expected to be able to cut rates 3 times in 2024 as recently as March. Financial markets agreed. But the data that's come out since then has everyone singing a different tune.  This week's data was more of an afterthought compared to last week's. The chart above pertains to Fed rate expectations, and that's not exactly the same as longer term rates like mortgages and 10yr Treasury yields.  The latter saw a bit more volatility this week. Monday's Retail Sales data was much stronger than expected and markets reacted immediately.  Tuesday's data was consequential, but it was followed by a speech in which Fed Chair Powell had an opportunity to provide some updated thoughts on the rate outlook.  After all, the Fed hadn't seen the most recent CPI data (and several other strong reports) at the time the last round of rate projections came out in March. As the market expected, the tone is evolving.  While Powell and the Fed repeat that the rate path depends on economic data, it's no surprise to see recent comments acknowledging a surprising amount of strength in the recent data.  Stronger data means fewer rate cuts.  Powell went as far as saying there was new uncertainty as to whether the Fed will even be able to cut in 2024. Two days later, NY Fed President John Williams struck similar tone.  Just last week, he had pushed back on the CPI data, saying the Fed wasn't surprised by setbacks in the inflation data.  This week's comments did more to acknowledge the other side of data dependency.  Specifically, Williams said the Fed could hike again if the data called for it.  
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Mortgage Rates Higher Today, But Not Quite as High as Tuesday Thu, 18 Apr 2024 19:36:00 GMT
Tuesday marked the highest mortgage rates since November, capping a mini surge that began after last week's inflation data. After a moderate improvement yesterday, rates moved back up toward (but thankfully not above) the recent highs today.  Financial markets reacted to stronger economic data and comments from Federal Reserve officials regarding the possibility of no Fed rate cuts in 2024 and even a small chance of rate hikes.  Importantly, Fed members don't see hikes as being likely and the economic data would have to accelerate enough to justify a change in strategy.  We're definitely not there yet, but we're just as certainly not there when it comes to lower inflation readings required to validate the first rate cut.  At the March Fed meeting, officials still saw 3 cuts by the end of the year, albeit just barely.  Based on data that's come out since then, markets are betting on only one cut. Other news sources are running headlines regarding a big jump in mortgage rates to 7.10% based on Freddie Mac's weekly survey results released today.  Keep in mind that's a weekly number based on average of last Thursday through yesterday and that it doesn't account for the impact of discount points.  In other words, rates are definitely not 7.1 today, and especially not without points.
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Mortgage Rates Finally Win One Wed, 17 Apr 2024 20:14:00 GMT
Mortgage rates moved lower today after hitting the highest levels since mid November yesterday.  Some lenders were down as much as an eighth of a percent, which is on the bigger side for a day-over-day change for conventional 30yr fixed rates.  As nice as it is to see a big improvement, it's important to understand the nature of the move.  Even when rates are spiking consistently higher, the carnage is invariably punctuated by brief moments of reprieve.  In fact, it's very rare for a rate spike to play out with each successive day being higher than the last.   In other words, as of today, it's not safe to view this improvement as anything other than a token bounce that exists as a normal byproduct of the pain that came before it.  All that having been said, there is also a chance that rates have moved up enough to get into their desired defensive position for the next round of big ticket data in early May.  We'll be able to better assess that possibility over the next two days.
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Mortgage Rates Back to 7.5% Tue, 16 Apr 2024 20:56:00 GMT
The bad times keep rolling for mortgage rates with the average conventional 30yr fixed rate back up to 7.5% according to our daily index.  This is quite a bit higher than the major weekly indices for a few reasons.  First, the weekly indices haven't been updated for the current week yet.  When that changes, because they are averages, they'll also include several days in the past where rates were a lot lower than they are today.  Slightly less important but still relevant is the fact that our index accounts for points by adjusting the rate itself. There are also reasons that our index could be lower than what any given borrower is seeing in the marketplace.  Chief among these would be that the scenario in question is not truly "top tier" (780+ FICO, 25% equity, etc.).  Finally, there are competitive differences between lenders even when all other variables are controlled.  All that having been said, the rate itself is only important in relation to this particular index.  In fact, any mortgage rate index is best used as a measure of how much things have moved as opposed to an outright rate target. On that note, things have moved quite a bit!  From longer term lows of 6.62 late last year, the jump to 7.5% takes us well over halfway back to the decades-long highs of 8.03 from October.  It's too soon to know if that's going to be a round trip journey, but we should know a lot more about that by the first week of May.  
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After Months of Relative Calm, Rates are Starting to Look Panicked Again Mon, 15 Apr 2024 19:55:00 GMT
In 2023, there were multiple examples of mortgage rates moving up by roughly half a percent in a relatively short amount of time (1-3 weeks).  Since the big shift in November, we've only seen one similar example and it was more of a technicality (a sharp drop in rates followed by a correction in early Feb), until today. Rates were already on the run toward higher levels at a fairly abrupt pace last week.  The culprit was economic data, starting with the strong jobs report on April 5th and the far more troubling inflation data last Wednesday. Today's Retail Sales report was the icing on this unpleasant data cake. To be clear, when it comes to Retail Sales, the data is actually very pleasant for the economy.  Unfortunately, what's good for economic growth is often bad for rates and that's doubly true at the moment when the market is waiting for more concrete evidence that the Fed's tight monetary policy is restricting growth. In other, simpler words, this data does not line up with the notion of Fed rate cuts in the near term.  It also had an immediate negative impact on the rest of the bond market, including the bonds that most directly dictate mortgage rates. The average lender is now back into the mid 7s for a top tier, conventional 30yr fixed scenario.
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Mortgage Rates Move Lower After 2-Day Rout, But Underwhelmingly So Fri, 12 Apr 2024 20:54:00 GMT
Wednesday was one of the worst days in decades in terms of single-day upward movement in mortgage rates.  Thursday added a bit more insult to the injury.  The resulting levels were the highest since November 2023.  We should be thankful, then, that Friday managed to push back in the other direction, but it would be easier to be a lot more thankful if the improvement was a bit more robust. Of course, things could have been worse.  We could have continued to even higher rates, so the lamentation here is a being intentionally dramatized a bit.  Nonetheless, it's a worth noting that the average lender is still basically right in line with the levels that broke our hearts on Wednesday afternoon. The optimists out there can cheer the fact that we mostly erased Thursday's additional bump.  The rest of us will continue aspiring to live with such a glass-half-full mentality. As for the nuts and bolts, the bond market improved overnight and then slowly deteriorated for most of the domestic trading session.  The movement wasn't big enough for most mortgage lenders to change rate sheets over the course of the day.  Instead, they set rates fairly conservatively in the morning (if they hadn't, we likely would have seen some upward adjustments in the afternoon). The average lender is still in the 7.25-7.375% range for a top tier conventional 30yr fixed, but it's easier to quote 7.125% today with some additional upfront cost.
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Mortgage Rates Are Actually The Highest Since Mid November Thu, 11 Apr 2024 20:14:00 GMT
Wednesday's Consumer Price Index caused a brutally fast spike in mortgage rates.  It wasn't notable for taking us to exceptionally high levels (October 2023 was much higher), but it was one of the biggest single-day jumps.  Either way, it easily took the average lender back to highest levels since November 2023.  Today was very tame by comparison although rates moved just a bit higher.  The average lender is at the weakest levels since November 20th, 2023.  This reality is at odds with many of today's mortgage rate headlines which mention 6.88% as this week's rate.  So what's the true story? 6.88% is a product of Freddie Mac's weekly survey.  What Freddie really means is that 6.88% was the 5 day average from last Thursday through yesterday. Moreover, Freddie's survey doesn't adjust for upfront discount points and several other loan features that can push rates down.  Combined with the averaging methodology and lag, Freddie's rate is frequently misleading for consumers who are trying to get a sense of where rates may be on any given day. Please be very well assured and very certain that 6.88% is not today's rate.  While a mortgage lender could technically still quote such rates, they would not be able to do so without higher upfront costs (aka "points").  Based on our apples to apples approach, today's rate would need to be 0.25-0.375% higher to be quoted with the same upfront costs as a rate from Tuesday (before the big spike). 
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Basically The Worst Day For Mortgage Rates Since October 2022 Wed, 10 Apr 2024 20:23:00 GMT
Mortgage rates surged at a pace seen only one other time since October 2022.  The average lender moved up by 0.28%, which is functionally equivalent to the 0.29% seen after the February 2nd jobs report.  In fact, today was arguably worse because the Feb 2nd example happened a day after rates hit long-term lows.  The implication is that the jump would not have been as big in early Feb if rates weren't undergoing a correction from those lows. Hair splitting aside, there just aren't many past examples of rates rising more than a quarter point in a day. Before covid, it had happened one other time in the past decade. Translation: it was a rough day for rates.  But why? We've been rather incessantly focused on the risks associated with today's Consumer Price Index (CPI) in the days and weeks leading up to its release.  It ended up exceeding the hype by showing that inflation refuses to head to the lower levels required for a lower interest rate environment.  Today is really that simple. Rates are highly dependent on inflation data at the moment.  We'll get another inflation report tomorrow, but it never operates on the same scale of relevance to rates as CPI.  That's not to say a friendly result wouldn't help, but the data stands an equal chance to be unfriendly, thus compounding today's problems as opposed to taking the edge off. We'll talk more about longer-term, bigger-picture implications on Friday.
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