Mortgage Rate Watch
A new home can be the biggest purchase of your life. Before you start looking for the right home, you may want to research your mortgage options.
But not all mortgages are created equal. So, by doing your research beforehand, you can choose the option that best suits your financial situation and potentially puts more money in your pocket. You also know what guidelines to follow when applying.
Types of mortgages
- Conventional loan – Best for borrowers with a good credit score
- Jumbo loan – Best for borrowers with excellent credit looking to buy an expensive home
- Government-insured loan – Best for borrowers who have lower credit scores and minimal cash for a down payment
- Fixed-rate mortgage – Best for borrowers who’d prefer a predictable, set monthly payment for the duration of the loan
- Adjustable-rate mortgage – Best for borrowers who aren’t planning to stay in the home for an extended period, would prefer lower payments in the short-term and are comfortable with possibly having to pay more in the future
Conventional loans, which are not backed by the federal government, come in two forms: conforming and non-conforming.
Conforming loans – As the name implies, a conforming loan “conforms” to the set of standards put in place by the Federal Housing Finance Agency (FHFA), which includes credit, debt and loan size. For 2023, the conforming loan limits are $726,200 in most areas and $1,089,300 in high-cost areas.
Non-conforming loans – These loans do not meet FHFA standards. Instead, they cater to borrowers looking to purchase more-expensive homes or individuals with unusual credit profiles.
- Can be used for a primary home, second home or investment property
- Overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher
- Can ask your lender to cancel private mortgage insurance (PMI) once you’ve reached 20 percent equity, or refinance to remove it
- Can pay as little as 3 percent down on loans backed by Fannie Mae or Freddie Mac
- Sellers can contribute to closing costs
- Minimum FICO score of 620 or higher is often required (the same applies for refinancing)
- Higher down payment than some government loans
- Must have a debt-to-income (DTI) ratio of no more than 45 percent (50 percent in some instances)
- Likely need to pay PMI if your down payment is less than 20 percent of the sales price
- Significant documentation required to verify income, assets, down payment and employment
If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is probably your best pick. The 30-year, fixed-rate mortgage is the most popular choice for homebuyers.
Jumbo mortgages are home loan products that fall outside FHFA borrowing limits. Jumbo loans are more common in higher-cost areas such as Los Angeles, San Francisco, New York City and the state of Hawaii, where home prices are often on the higher end.
Pros of jumbo loans
- Can borrow more money to purchase a more expensive home
- Interest rates tend to be competitive with other conventional loans
- Often the only finance option in areas with extremely high home values
Cons of jumbo loans
- Down payment of at least 10 percent to 20 percent required in many cases
- A FICO score of 700 or higher usually required
- Cannot have a DTI ratio above 45 percent
- Must show you have significant assets in cash or savings accounts
- Usually require more in-depth documentation to qualify
Who are jumbo loans best for?
If you’re looking to finance a home with a selling price exceeding the latest conforming loan limits, a jumbo loan is likely your best route.
The U.S. government isn’t a mortgage lender, but it does play a role in making homeownership accessible to more Americans by guaranteeing certain types of loans — thus lessening the risk for lenders. Three government agencies back mortgages: the Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA) and the U.S. Department of Veterans Affairs (VA).
- FHA loans – Backed by the FHA, these home loans come with competitive interest rates, and help make homeownership possible for borrowers without a large down payment or pristine credit. You’ll need a minimum FICO score of 580 to get the FHA maximum of 96.5 percent financing with a 3.5 percent down payment. However, a score as low as 500 is allowed if you put at least 10 percent down. FHA loans require mortgage insurance premiums, which can increase the overall cost of your mortgage. Lastly, with an FHA loan, the home seller is allowed to contribute to closing costs.
- USDA loans – USDA loans help moderate- to low-income borrowers who meet certain income limits buy homes in rural, USDA-eligible areas. Some USDA loans do not require a down payment for eligible borrowers. There are extra fees, though, including an upfront fee of 1 percent of the loan amount (which can typically be financed with the loan) and an annual fee.
- VA loans – VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. There’s no minimum down payment, mortgage insurance or credit score requirement, and closing costs are generally capped and may be paid by the seller. VA loans charge a funding fee, a percentage of the loan amount, which can be paid upfront at closing or rolled into the cost of the loan along with other closing costs.
Pros of government-insured loans
- Help you finance a home when you don’t qualify for a conventional loan
- Credit requirements more relaxed
- Don’t need a large down payment
- Available to repeat and first-time buyers
- No mortgage insurance and no down payment required for VA loans
Cons of government-insured loans
- Mandatory mortgage insurance premiums on FHA loans that usually cannot be canceled
- FHA loan sizes are lower than conventional mortgages in most areas, limiting potential inventory to choose from
- Borrower must live in the property (although you may be able to finance a multi-unit building and rent out other units)
- Could have higher overall borrowing costs
- Expect to provide more documentation, depending on the loan type, to prove eligibility
Who are government-insured loans best for?
Are you having trouble qualifying for a conventional loan due to a lower credit score or minimal cash reserves for a down payment? FHA-backed and USDA-backed loans could be a viable option. For military service members, veterans and eligible spouses, VA-backed loan terms are often more generous than a conventional loan’s.
Fixed-rate mortgage
Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means your monthly mortgage payment always stays the same. Fixed loans typically come in terms of 15 years or 30 years, although some lenders allow borrowers to pick any term between eight and 30 years.
Pros of fixed-rate mortgages
- Monthly principal and interest payments stay the same throughout the life of the loan
- Easier to budget housing expenses from month to month
Cons of fixed-rate mortgages
- If interest rates fall, you’ll have to refinance to get that lower rate
- Interest rates typically higher than rates on adjustable-rate mortgages (ARMs)
Who are fixed-rate mortgages best for?
If you are planning to stay in your home for at least five to seven years, and want to avoid the potential for changes to your monthly payments, a fixed-rate mortgage is right for you.
In contrast to fixed-rate loans, adjustable-rate mortgages (ARMs) have interest rates that fluctuate with market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. For example, you might see a 7/6 ARM, which means that your rate will remain the same for the first seven years and will adjust every six months after that initial period. If you consider an ARM, it’s essential to read the fine print to know how much your rate can increase and how much you could wind up paying after the introductory period expires.
Pros of ARMs
Lower fixed rate in the first few years of homeownership (although this isn’t a guarantee; as of late, 30-year fixed rates have actually been similar to those for 5/6 ARMs)
Can save a substantial amount of money on interest payments
Cons of ARMs
Monthly mortgage payments could become unaffordable, resulting in a loan default
Home values may fall in a few years, making it harder to refinance or sell before the loan resets
Who are adjustable-rate mortgages best for?
If you don’t plan to stay in your home beyond a few years, an ARM could help you save on interest payments. However, it’s important to be comfortable with a certain level of risk that your payments might increase if you’re still in the home.
Other types of home loans
In addition to these common kinds of mortgages, there are other types you may find when shopping around for a loan:
- Construction loans: If you want to build a home, a construction loan can be a good financing choice — especially a construction-to-permanent loan, which converts to a traditional mortgage once you move into the residence. These short-term loans are best for applicants who can provide a higher down payment and proof that they can afford the monthly payments.
- Interest-only mortgages: With an interest-only mortgage, the borrower makes interest-only payments for a set period – usually five and seven years — followed by payments for both principal and interest. You won’t build equity as quickly with this loan, since you’re initially only paying back interest. These loans are best for those who know they can sell or refinance, or for those who can reasonably expect to afford the higher monthly payment later.
- Piggyback loans: A piggyback loan, also referred to as an 80/10/10 loan, involves two loans: one for 80 percent of the home price and another for 10 percent. You’ll make a down payment for the remaining 10 percent.These loan products are designed to help the borrower avoid paying for mortgage insurance. But piggyback loans require two sets of closing costs, and you’ll also accrue interest on two loans, making this unconventional arrangement these best for those who will actually save money using it.
- Balloon mortgages: A balloon mortgage requires a large payment at the end of the loan term. Generally, you’ll make payments based on a 30-year term, but only for a short time, such as seven years. When the loan term ends, you’ll make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared or your credit situation deteriorates. These loans are best for those who have the stable financial resources needed to make a large balloon payment once the loan term ends.
Mortgage Rates Lower on Average, But Timing Matters
The bond market is the primary driver of mortgage rate movement and normally, "weakness" equates to higher rates. Bonds are slightly weaker today compared to yesterday afternoon, but mortgage rates nonetheless managed to move lower. What gives? Timing is partly to blame. Bonds may be weaker than yesterday afternoon, but they're still stronger than yesterday morning, when most lenders publish their rates for the day. After that initial rate offering, it takes a fair amount of bond market volatility before the average mortgage lender will make changes to mortgage rates. Several lenders offered improvements yesterday afternoon in response to bond market improvements. In those cases, their rates were fairly similar today. Ironically, just as yesterday's volatility resulted in improvements for rates, today's volatility is doing the opposite with several lenders "repricing" to slightly higher levels. The net effect is an average rate that is just a hair below yesterday's, and also the lowest in just over a month.
18 hours 44 minutes ago
Checkout newsMortgage Rates Little-Changed After Last Week's Improvement
Mortgage rates remain elevated relative to the levels seen in September and early October, but they've definitely moved down a bit from their recent highs. Thanksgiving week saw the lowest daily average rate in exactly a month, but there's never a guarantee the rate market will look the same on the following week. Thankfully, it's almost perfectly unchanged this time around. The average lender is still able to offer top tier conventional 30yr fixed rates just under 7% for the 4th straight day. There were no major sources of inspiration today, but that will change as the week progresses. Friday's jobs report is especially significant. The same report has had the biggest impact of any economic report on multiple occasions in the past few months.
1 day 17 hours ago
Checkout newsLowest Mortgage Rates in a Month
The interest rate market continues the healing process after taking heavy damage in October. During the course of that month, the average top tier conventional 30yr fixed rate increased more than 0.75% and broke above 7.0% for the first time since early July. The first few days of November saw some additional volatility with our rate index hitting 7.13% on November 6th. Things have calmed down more and more since then. While this doesn't mean there's been a huge correction back toward lower levels, the absence of additional weakness is nearly as big of a victory as we could have seen. Today's installment didn't bring a huge day-over-day change to mortgage rates, but we were already close enough to the 1-month low that a modest improvement is all it took. Rates take cues from bonds which, in turn, take cues from economic data, among other things. Today was the busiest day of the week for data, but none of it ended up causing a big move in one direction or the other. Instead, bonds calmly continued toward stronger levels. Be aware that this sort of movement at this time of the year can be a serendipitous byproduct of market motivations that don't have anything to do with the typical motivations. That's an opaque phrase, to be sure, but a high detail explanation would require a novel, and it would be fairly esoteric to boot. Suffice it to say that traders have to make certain trades before the end of the month, and most bond traders would consider that to be today. It shouldn't necessarily be viewed as an indication of additional positive momentum.
6 days 19 hours ago
Checkout newsMortgage Rates Steady to Slightly Higher
Although there was a busier calendar of economic data today, mortgage rates are little changed after dropping at the fastest pace in several weeks to start the new week. Economic data is one of the main sources of motivation for the bond market which, in turn, influences day to day changes in mortgage rates. For non-data-related reasons, bonds lost a small amount of ground compared to yesterday. As such, it's no surprise to see the average mortgage lender offering modestly higher rates today, but the MND index for top tier 30yr fixed rates remains easily under 7% for the 2nd day in a row. Tomorrow's slate of economic data is more highly charged. It's not remotely on the level of, say, the big jobs report next week, but there's a higher risk of data-driven volatility. There can also be some random trading in either direction on Thanksgiving week due to unique market conditions created by a heavily abbreviated trading week (The bond market is closed on Thursday and half of Friday).
1 week ago
Checkout newsMortgage Rates Near Lowest Levels in a Month
Last Monday, mortgage rates were near the highest levels in more than 3 months. A week later, and the average lender is right in line with the lowest levels in more than a month. There are two reasons for this, or rather, one reason and one caveat. The caveat is that the range has been fairly narrow since the end of October. Most of the recent rate spike took place by October 24th, so we didn't have to traverse much ground to get back to those rates. Additionally, those rates are still substantially higher than the beginning of October. The specific reason for today's improvement is the bond market's reaction to Trump's Treasury Secretary appointment. Bonds dictate rates, and bonds are relieved to see a more fiscally conservative pick. To oversimplify the underlying dynamic, it's easier for rates to move lower when the Treasury department isn't issuing debt at a record pace. That goal is seen as more achievable under Bessent. The average top tier 30yr fixed mortgage rate fell back below 7% with today's move, but not by much. This means many borrowers will still be seeing rates in the low 7s, even for top tier scenarios.
1 week 1 day ago
Checkout newsA Refreshingly Boring Week For Mortgage Rates
Starting in early October, mortgage rates experienced significant volatility, meaning the average day over day change was much bigger than normal. While the term "volatility" technically allows for larger-than-normal moves in either direction, there was a clear winner in this case with rates moving almost a full percent higher. Rates take direct cues from the bond market which, in turn, takes cues from several sources. These include economic data, inflation, geopolitical events, fiscal policy, and monetary policy. This particular episode was frustrating for fans of low rates because things seemed to be getting worse with and without the typical motivations. In a nutshell, there was no winning, and all we could do was wait for the smoke to clear. Some semblance of reprieve began to take shape last week, but the underlying bond market remained jumpy. Volatility finally died down this week. The average 30yr fixed rate held inside a narrow 0.05% range and ended at the exact same levels seen last Friday. Just as notable: these are also the same levels that served as the mid-point during the more volatile time frame surrounding the election. In other words, rates arguably hit some sort of ceiling as early as October 28th and have simply been honing in on the middle ground. This is the best victory that we could have hoped for in the near term. Rates are afraid of stronger economic data, more persistent inflation, and an overabundance of government debt (something that puts constant upward pressure on rates behind the scenes). In order to see a big drop to lower levels, we'd need to see the most closely watched economic reports come in much weaker and for inflation to drop to below-target levels in month-over-month terms (likely for a few months in a row).
1 week 4 days ago
Checkout newsCalmer Trend Continues For Mortgage Rates
They may not be low. In fact, they may still be a lot higher than you want, but at least they haven't been too volatility this week. For the 7th day in a row, the top tier, conventional 30yr fixed mortgage rate ended the day in the same narrow range between 7.01% and 7.08% for the average lender. Today's installment was one of the least eventful, with a modest drop from 7.05 to 7.04. The relatively light day over day volatility in mortgage rates is a reflection of the same level of volatility in the underlying bond market. Sure, there have been some fairly big intraday swings at times, but the bigger picture has been much flatter in November compared to October. The lower volatility in the bond market is fairly easy to reconcile with a lack of actionable economic data. Today's data COULD have been actionable, but it was mixed in its implications for growth. If it had been much stronger or weaker than expected, rates could certainly have moved more meaningfully. As it stands, the bond market and the mortgage rate watcher are both waiting for early December as the next time frame with truly massive risks of volatility. Please note: this doesn't mean we can't see volatility between now and then! Rather, the early December economic data simply carries the bigger risks of inspiring bigger rate movements. As always, that requires a "for better or worse" qualifier, because volatility can go both ways. It just hasn't gone our way very much since mid September.
1 week 5 days ago
Checkout newsMortgage Rates Have Been Much Calmer, But They're Still High
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.
1 week 6 days ago
Checkout newsMortgage Rates Only Modestly Lower Despite Seemingly Big News
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]
2 weeks ago
Checkout newsMortgage Rates Didn't Move Much Over The Weekend
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.
2 weeks 1 day ago
Checkout newsMortgage Rates End Higher, But Not As High as This Morning
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.
2 weeks 4 days ago
Checkout newsMortgage Rates Roughly Unchanged Yet Again Despite Bond Market Losses
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.
2 weeks 5 days ago
Checkout newsMortgage Rates Roughly Unchanged Today
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.
2 weeks 6 days ago
Checkout newsMortgage Rates Jump Back Above 7%
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.
3 weeks ago
Checkout newsMortgage Rates Lower Again As Lenders Catch Up With Bonds
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.
3 weeks 4 days ago
Checkout newsTricky Day... Mortgage Rates Fall Significantly, But Not Because of The Fed
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).
3 weeks 5 days ago
Checkout newsPlease Forget Everything You Think You Know About Fed Rate Cuts
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!
3 weeks 6 days ago
Checkout newsMortgage Rates Start Higher, But Fall in Afternoon
More often than not, mortgage lenders only set rates once a day. Their decisions are based on trading levels in the underlying bond market. Even though bonds are constantly moving, it doesn't make sense for lenders to make a change unless a certain threshold of market movement is surpassed. The result is what the industry refers to as a "mid day reprice." The AM hours saw a handful of lenders reprice for the worse (i.e. toward higher rates) as bonds lost ground after the ISM Services report (a closely-watched economic report that tends to influence the bond market if it comes in much higher or lower than forecast). Today's ISM data was much stronger, thus pushing bond yields higher. The afternoon hours were not as easy to connect to root causes and obvious motivations. One can only assume that we continue witnessing a substantial amount of pre-election volatility in the bond market. While that's mostly worked against rates, the opposite was true this afternoon. The improvement allowed most lenders to update their rate offerings. All told, the average lender moved from what were just barely the highest levels in months this morning, back to just a hair below yesterday's levels. As you've probably heard, it's election day and while this remains the biggest source of potential volatility, that volatility won't begin to play out for rates until tomorrow morning at the earliest.
4 weeks ago
Checkout newsMortgage Rates Start Week Slightly Lower as Election Volatility Works Both Ways
Love it or hate it, election-related volatility has been having a big impact on the bond market and, thus, mortgage rates. Most of the volatility has resulted in higher rates, but there was an exception over the weekend. Due to a combination of shifting odds in betting markets and among pollsters, rates recovered a portion of the ground lost last week. Mortgage rates didn't react in an extreme fashion, but the average lender moved back down toward 7% for a top tier conventional 30yr fixed scenario. The same scenario was closer to 7.125% late last week. To whatever extent we've seen election-related volatility so far, it's a fair expectation that we'll see follow-through after a winner is confirmed. Our best read on prevailing sentiment is that a Trump victory will cause rates to move even higher whereas a Harris victory would lead to a friendly correction. This is based on a assessment of how bonds have moved relative to several measures of election odds in addition to feedback and commentary from a substantial majority of analysts and traders. NOTE: these are only the outcomes associated with the immediate future. No one really knows how rates would fare in the longer term. There are scenarios where rates could move lower in a Trump administration and higher in a Harris administration.
4 weeks 1 day ago
Checkout newsRates Refuse to Drop Ahead of Election. How About After?
It is our longstanding policy to strictly avoid politics except in cases where the political realm legitimately intersects with relevant events for rates. Now is clearly one of those times. The discussion that follows contains no opinion or partisan leaning. Before getting started, let's catch up with mortgage rates. Things haven't been great and much of the media coverage focuses on Freddie Mac's stale weekly survey number. Actual daily averages are already much higher. Today didn't offer any material change on that front, leaving us free to focus on what may lie ahead. There is an objective correlation between various measures of the election outcome and recent rate movement. Correlation is not necessarily causality, but comments from several high profile investors have bolstered the case for a Trump victory resulting in higher rates. Notably, many of them qualify that by saying it's more about the opportunity for full republican control of Congress and The Oval Office (i.e. the red sweep). On one hand, there is certainly correlation here. On the other hand, it's far from perfect. Additionally, there are other key events in this time frame that definitely account for a good deal of movement in interest rates--possibly enough movement to think twice before assuming we can even know how rates would react to the election. Today's jobs report reaction provided the latest reason for doubt. Rates refused to drop after a weak jobs report--something they'd normally be happy to do. There was an initial, reflexive drop in 10yr Treasury yields, as seen in the chart below, but it was quickly erased. Treasury yields are well-correlated with mortgage rates. A chart like this can show us intraday momentum in the bond market whereas mortgage lenders only update mortgage rates 1-3 times a day depending on volatility. This was a relatively low volume move for a jobs report-further suggesting the market's mind is elsewhere.
1 month ago
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