Mortgage Rate Watch
Mortgage Rates Have Been Much Calmer, But They're Still High Wed, 20 Nov 2024 21:22:00 GMT
Remember October and the first part of November--not because of the election, but rather because of the relentless rise in mortgage rates?  Would you rather forget?  You're not alone.  It was the fastest rate spike since 2022, and it was made all the more memorable because it put an end to the first real uptick in refinance activity in just as long. In the days following the election, there was quite a bit of volatility in rates, but with the benefit of hindsight, we can say that the volatility has subsided.  Tuesday, November 12th was the last time rates made a decently big day-over-day move.  Since then, we haven't seen top tier 30yr fixed rates change by more than 0.04% in either direction.  More impressively, they've held a range of only 0.06% during that time.  That's a low volatility environment by any standard. Today fit perfectly in that narrative with the average lender only moving up 0.01%.  After adjusting for upfront costs,  30yr fixed rates remain just over 7%.   Any time we're marveling at the absence of volatility, a word of caution is in order.  Volatility can come back any time.  Its return can be driven by surprises or by scheduled data.  At the very least, we can be sure that the scheduled data in the first two weeks of December has immense potential to reignite volatility, for better or worse.
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Mortgage Rates Only Modestly Lower Despite Seemingly Big News Tue, 19 Nov 2024 21:27:00 GMT
Ask your favorite curmudgeonly old market watcher and they'll be happy to explain what "always" happens in financial markets when there's breaking news regarding large scale geopolitical risk.  It would be a surprise if you didn't hear a phrase like "flight to safety," the most common shorthand reference to selling stocks and buying bonds. Why would mortgage rates care about all that?  A few reasons... First off, rates are driven by bonds.  "Buying bonds" would help rates move lower, all other things being equal. Another reason to care is that, within the last 24 hours, the U.S. authorized Ukraine to use long range missiles to attack Russia, Ukraine has already attacked Russia, and Russia has already threatened to respond with nuclear weapons in not so many words. Feed those details into a magical trading computer and it would predict exactly what we saw in overnight trading.  Stocks fell and bonds/rates improved.  The computer would likely vastly overestimate the size of the improvement in rates, however, as well as the fact that stocks would end up higher by the end of the day. All that to say that the improvement in mortgage rates was wholly underwhelming relative to the news headlines--likely because it's far from the first such threat from Russia, or because traders are skeptical that anyone wants to push any of the red buttons on the "mutually assured destruction" machine.  [thirtyyearmortgagerates]
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Mortgage Rates Didn't Move Much Over The Weekend Mon, 18 Nov 2024 21:01:00 GMT
The average top tier conventional 30yr fixed rate was just a hair over 7% on Friday afternoon and the same is true at the start of the new week.  Rates are based on bonds, but while bonds move constantly throughout the day, mortgage lenders only adjust rates once per day unless there's excessive volatility in the bond market.  This concept has been important, recently, because there's been more intraday volatility than normal.  Intraday volatility came into play on Friday afternoon, but too late in the day for almost any lender to do anything about it.  As a result, the bond market implied slightly higher rates this morning, simply because lenders never got around to raising rates on Friday afternoon. The net effect is modestly paradoxical: the bond market is actually slightly better (i.e. bonds are saying rates should be a bit lower), but the average lender is actually offering slightly higher rates versus Friday.  Fortunately, the difference between "higher" and "lower" in this example is so small that no one will care, but it's important to understand HOW these things transpire in order to make sense of more serious examples. As for the risk of more serious volatility, the only sure bet is that the first two weeks of December are the most important 2 weeks left in 2024.  This has to do with the economic data on tap and its impact on the Fed announcement that will follow on the 3rd week.  The time between now and then is anyone's guess.  All we know is that rates have been trending gradually higher without any signs of major reprieve.  That could change in the near term, but not likely in a way that sends rates sharply lower.  In other words, the best victory we could hope for would be for rates to simply avoid making new long-term highs.  In that sense, today was a victory.
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Mortgage Rates End Higher, But Not As High as This Morning Fri, 15 Nov 2024 19:54:00 GMT
This afternoon's mortgage rates are higher than yesterday's latest levels.  That's a result of bond market weakness seen late yesterday and earlier this morning.  Why would yesterday's market movement matter?  Simply put, it was too late in the day for many lenders to go to the trouble of adjusting their rate sheets.   Bonds continued to weaken this morning, making it an easy call for mortgage lenders.  The average lender was very close to the highest levels of the past several months seen on November 6th.  Fortunately, bonds managed to improve after that and most lenders were ultimately able to offer positive reprices.  This wasn't enough to get rates back to yesterday's levels, but it erased about half of the weakness. 
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Mortgage Rates Roughly Unchanged Yet Again Despite Bond Market Losses Thu, 14 Nov 2024 21:15:00 GMT
Losses... weakness... selling pressure...  When any of these things happen in the bond market, it puts upward pressure on interest rates.  Mortgage rates are primarily determined by bonds, after all.   Today started out well enough for the bond market.  This allowed mortgage lenders to set today's rates roughly in line with yesterday's levels.  That makes for 3 days in a row with the average lender offering top tier 30yr fixed rates just a hair above 7%.  Fed Chair Powell have a speech and answered questions today at a regional event in Dallas.  He echoed recent comments from other Fed speakers regarding the pace of Fed rate cuts. In short, Fed sentiment is shifting in favor of slower pace. As we hopefully learned from the market movement heading into (and out of) the Fed's September meeting, expectations for Fed rate cuts have an immediate impact on longer term rates like mortgages. Days like today contribute to cooler expectations for rate cuts and thus put upward pressure on rates.  That's not immediately apparent in mortgage rates, but this had more to do with the timing of bond market movement today.   Fortunately, bonds had gained some ground before they lost ground.  The net effect is not big enough for most mortgage lenders to raise rates. 
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Mortgage Rates Roughly Unchanged Today Wed, 13 Nov 2024 20:28:00 GMT
While there's been plenty of movement in the average mortgage rate on any given day recently, today was not one of them.  30yr fixed rates remained above 7%, but technically fell 0.01% (an amount so small that it may as well be considered an absence of change).   Despite the flat day-over-day result, there continues to be much more intraday movement than normal.  Mortgage lenders publish an initial rate in the morning and it only changes if the bond market moves enough in one direction or the other.  Over the decades, on any given day, the average lender is more likely to keep the same rate offerings all day.  Recently, however, that's the exception.  Most lenders have faced multiple situations that have forced a mid-day reprice on any given week.  The past two days haven't been as volatile in that regard, but many lenders ended up pushing rates a bit higher after starting the day in lower territory.   If there was a reason that rates were able to hold ground today, it was the bond market's favorable reception to this morning's Consumer Price Index (CPI), a key inflation report that showed a modest improvement versus last month.  Some market watchers were concerned that inflation would continue to trend higher--something that would push rates higher, all other things being equal.
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Mortgage Rates Jump Back Above 7% Tue, 12 Nov 2024 20:35:00 GMT
Last Thursday and Friday offered some hope that the persistent move to higher rates was finally leveling off.  It wasn't necessarily a rational hope, but if nothing else, it was "nice" to see the average 30yr fixed move back below 7%.  Even then, we cautioned against viewing the recovery as indicative of ongoing success.  Now today, we see why. Bonds (which dictate rates) have moved swiftly back into the weaker territory that precipitated the move over 7% in mortgage rates.  As such, it's no surprise to see the average lender easily back into the 7s.  For context, rates were as high as 7.5% in April and 8.0% at their long-term peak roughly a year ago. As for motivations, the market continues to work through election-related volatility.  That involves a complex set of considerations.  Some of them have to do with actual expectations for changes in fiscal policy in the coming years. Some of the considerations are as simple as traders going through the process of exiting (and re-setting) trading positions heading into the election. Motivations aside, it continues to be the case that interest rates would need to see significant weakness in economic data and a stronger move toward lower inflation in order for any real progress.  Tomorrow morning brings the first of the week's big data points in the form of the Consumer Price Index (CPI)--an inflation report with a solid track record of inspiring reactions in rates.  
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Mortgage Rates Lower Again As Lenders Catch Up With Bonds Fri, 08 Nov 2024 22:22:00 GMT
The bond market dictates day to day movement for all manner of interest rates, including mortgages.  On election night, bond yields (another word for "rates") spiked as soon as traders felt the results were evident.  The following morning, mortgage-backed bonds started out much weaker and mortgage rates were at the highest level in months. Fast forward two days and mortgage rates are back below 7% and at the lowest levels since October 25th.  While that's not an exceptional leap into the past, it's certainly better than a continued move to infinity and beyond.  What gives?! In not so many words, not much.  The bond market had rushed to get into position for the election, and the reaction to election night itself ended up being a mere formality that was quickly erased--a testament to how accurately the market predicted where it would have wanted to be WELL in advance. Today's rate improvement wasn't as much a factor of bond market gains as it was mortgage lenders getting caught up to the gains from yesterday.  Lenders have been understandably cautious given the big swings in bonds and the prospect for additional volatility.  At times like this, it's not uncommon for lenders to wait a bit longer than normal to be sure bond market improvement is sustained before adjusting mortgage rates.   As nice as this recovery is, it shouldn't be viewed as indicative of ongoing success.  Rates continue to face headwinds that will only truly be defeated by weaker economic data and lower inflation.  To that end, economic reports will continue playing an important role.  Next week's headliners include the Consumer Price Index (CPI) and Retail Sales on Wednesday and Friday respectively.  Monday is closed for Veterans Day.
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Tricky Day... Mortgage Rates Fall Significantly, But Not Because of The Fed Thu, 07 Nov 2024 21:33:00 GMT
There's a distinct risk that, even in the financial community, that people will look back on today's drop in interest rates and conclude it must have something to do with the Federal Reserve's latest policy announcement.  After all the Fed did cut its policy rate by 0.25% today, and the Fed was the only big ticket event on the calendar. Unfortunately, almost all of the improvement in rates was in place well before the Fed announcement was released.  This isn't a case of financial markets moving into position for an expected outcome either.  The Fed's cut was 100% expected, and Fed Chair Powell had nothing too surprising to say (even if the delivery was memorable when he was asked if he'd resign if asked by the president). So why did bonds/rates improve so much? We have to apply the same logic to gains that we've applied to other election related volatility.  The election mobilized a massive (and massively volatile) amount of trading positions in the bond market and beyond.  We've seen several rate spikes that were just as bad as today's rate drop was good.  All we could do with many of those was simply take them in stride and chalk them up to the exceptional volatility and highly charged environment. Today's friendly volatility is a constant invitee to these episodes, even if it feels like it doesn't show up as frequently as other guests. To some extent, this morning's Jobless Claims data may have contributed, but it doesn't make sense to give it too much credit until other data shows similar cause for concern (continuing jobless claims are up to the highest levels in several years).
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Please Forget Everything You Think You Know About Fed Rate Cuts Wed, 06 Nov 2024 20:03:00 GMT
Mortgage rates spent the entire month of October moving higher at a fairly quick pace.  Some of that had to do with stronger economic data, but at least as much had to do with the bond market adjusting to election probabilities.  As we've been advising in recent weeks, the consensus was that a Trump victory (or improved odds thereof) was associated with upward pressure on rates. The bond market left no doubts late last night as 10yr Treasury yields spiked almost all the way to 4.5% well before any news team was anywhere close to confirming a winner.  Bonds didn't lose any additional ground during the business day, even though that's when a majority of the world was waking up to the news that the election was a done deal. This was not a matter of financial markets guessing or betting.  It was a reflection of the efficiency of financial markets compared to analysis that isn't trained to operate on the most immediate and precise timelines.  In other words, markets knew before news organizations knew because that's the market's job.  Follow the money. On that note, the market also knows the Federal Reserve is going to cut the Fed Funds Rate by 0.25% tomorrow.  It knows this with near 100% certainty and as such, longer term rates have long since adjusted for this particular rate cut.  There will be absolutely no impact on mortgage rates from tomorrow's Fed rate cut!   Any perceived impact will be due to the content of the Fed's policy statement or Fed Chair Powell's press conference--and that impact could play out in either direction!
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