Archive for the ‘Mortgage Rate Watch’ Category

Mortgage rates moved much lower this week with another strong move today.  As we discussed yesterday, this is certainly at odds with the prevailing news coverage, which continues to focus on yesterday's Freddie Mac survey.  Here's a link to yesterday's article, or you can take my word for it that Freddie's survey is now outdated.

Or you could just forget all that and consider the following.  At several huge, "household name" lenders, the upfront costs on a 30yr fixed quote of 4.75% are now the same as they were for 4.875% just a few days ago.  That's a strong week by anyone's standards, and it brings today's rates in line with the lowest of the past several weeks. 

Mortgage rates moved lower again today, bringing them to the best levels in at least 2 weeks.  This assertion is very much at odds with the prevailing mortgage rate headlines today.  News stories abound with talk of sharp increases to fresh 7-year highs (google news search if you don't believe me), yet nothing could be more of a disservice to the demographic that typically looks for mortgage rate news (people who are in the market)!

If you are indeed in the market or otherwise have a vested interest in day-to-day mortgage rate fluctuations, you need to understand that all those news stories are based on Freddie Mac's weekly rate survey, and that Freddie Mac is wrong.  To be fair, it's not so much "wrong" as it is "late."  Unfortunately, Freddie's survey typically captures lenders' claimed rate quotes for Monday and Tuesday. 

This week hadn't been too traumatic for mortgage rates through yesterday afternoon, but neither had it been positive in any noticeable way.  That changed today as rates fell abruptly to the lowest levels since last Monday.  Granted, at the time, last Monday's rates were still pretty close to the worst in 7 years, but the point is that we've managed to find our way back from the even higher rates that followed.

Help came chiefly from European political developments where Italy is a day or two away from confirming a government that could end up pushing the country out of the Eurozone.  Even though that's far from guaranteed, the mere risk of such a thing is enough to drive investors toward safer haven bonds like those issued by Germany or the US.  In general, excess demand for bonds means rates move lower.

After quite a bit of volatility and a move up to 7-year highs last week, mortgage rates have managed to avoid any semblance of drama so far this week.  In fact, each of the past 2 days has seen the average lender keep 30yr fixed rates perfectly in-line with Friday's latest levels.  The worst that could be said of these rates is that they're very close to last week's highs. 

The second worst thing that could be said of these rates is that they're the latest in a series of gradual moves higher over the past few years.  The general expectation is that rates can continue to move higher as long as the economy continues to tolerate higher borrowing costs.  Mortgage lenders know that we are now in a rising rate environment.  That means they're less likely to offer huge improvements on rate sheets unless we see a sustained and substantial improvement in bond market levels.  Until that kind of improvement shows up (we'll definitely be talking about it when it happens), it makes sense to remain defensive in terms of locking vs floating.

Mortgage rates held steady today, which is better than what could be said for most of last week when rates shot up to the highest levels in 7 years.  Friday was the only day of improvement, but it was scarcely enough to undo the damage from the previous 4 days.  That said, it did raise questions.  Specifically, was Friday some sort of indication that the worst was behind us in terms if upward rate momentum?

Answering that question is tricky business because the time frame matters greatly.  In the short term, there's always a possibility that a prevailing trend toward higher rates will cool-off and reverse course.  While that's also technically possible over longer time horizons, we can begin to talk more about probabilities and less about random chance.  With that in mind, we've be discussing the general momentum toward higher rates for many months now.  Rest assured it will be big news when and if it changes.

Mortgage rates caught some small semblance of a break today.  If it's not apparent based on that assessment in conjunction with the headline, the improvements certainly left something to be desired, even though that's to be expected, given the circumstances. 

Here's what I mean by that:

Rates are based on the bond market.  Trading levels in the bond market are back in line with (or slightly better than) Tuesday's levels.  But mortgage rates are still higher than those seen on Tuesday.  It's really that simple.

Why is it to be expected?

It's Thursday, which is when Freddie Mac's weekly Mortgage rate survey comes out. The survey is the most widely quoted source material for major media outlets. As such, headlines abound about the "highest mortgage rates in 7 years."  Of course, we've already discussed these 7 year highs earlier in the week when they actually occurred.  And I even pointed out that Freddie would almost certainly be following suit in yesterday's post.

But enough about me.  How about those rates?! Well, they're pretty high, but as far as individual days go, today saw the lowest amount of carnage compared to Tuesday and Wednesday.  

Mortgage rates spiked to 7-year highs yesterday.  While today's move was nowhere near the same size, it was in the same unfriendly direction.  That makes it the worst day for mortgage rates since the middle of 2011.  Whether "the middle" refers to May or July depends upon whom you ask.  In terms of individual days, a few were slightly higher in July on a day or two (depends on the lender). 

But in terms of weekly rate surveys, we'll need to go back to May 2011, to see Freddie Mac report something higher than 4.58%--the matching highs from 3 weeks ago and August 2013--at least until tomorrow.  Even with Freddie's typical margin of error, it's highly likely that 4.58% is a line that will be crossed in tomorrow morning's data.

Mortgage rates spiked in a big way today, bringing some lenders to the highest levels in nearly 7 years (you'd need to go back to July 2011 to see worse).  That heavy-hitting headline is largely due to the fact that rates were already fairly close to 7-year highs, although today did cover quite a bit more distance than other recent "bad days." 

In fact, today covered more ground BECAUSE we were so close to those highs.  This has to do with trading strategies that are based on math and momentum.  The high rates from 3 weeks ago were the same as the high rates seen in 2013/2014.  That reinforced a magic line in the sand that--if crossed--was likely to result in extra momentum moving through to the other side. 

Mortgage rates were sideways to slightly higher today, and that's actually a strong showing considering what transpired in underlying bond markets.  In fact, I'd wager tomorrow morning's rate sheets will be noticeably weaker if bonds are anywhere near their current levels. 

This flow of logic raises a valid question: if bonds drive rates and if bonds say rates should be higher, then why aren't they higher already? 

The answer is fairly simple: mortgage lenders put out one rate sheet per day unless market conditions force them to change.