Archive for the ‘Mortgage Rate Watch’ Category

Mortgage rates moved lower at their best pace in several weeks today, with the average lender making it back to levels not seen since April 12th.  The gains were bigger than normal for two reasons.  First, bond markets had improved slightly yesterday afternoon, but  not enough for lenders to adjust their rate sheet offerings for the better.  Thus, they had to play a bit of catch-up with this morning's rate sheets.  The bigger factor was the additional bond market strength seen throughout the overnight trading session and well into the domestic trading hours.

When bonds make "gains," it means that bond prices are moving up.  The price of a bond is like the amount that a lender is willing to pay for the right to collect a certain amount of interest.  The more the lender is willing to pay, the lower that lender's "yield" will be.  Looked at another way, the lower your interest rate would be in the case of a lender making you a mortgage loan.  For that reason, we expect to see mortgage rates fall when bonds are making gains (mortgages are based primarily on bond prices/yields).  But in today's case, rates went a bit higher even though bonds improved.

Mortgage rates were higher again on Monday, but just barely.  The average lender was still in worse shape on Tuesday or Wednesday of last week when rates were the highest they'd been in about a month.  

Rates reflect demand in the bond market.  Bonds can be bought or sold for a variety of reasons, but one of the key reasons is the general levels of fear and optimism surrounding the economy.  When investors are less certain about positive economic outcomes, they tend to buy more bonds.  This results in rates moving lower.  

Mortgage rates have generally been moving higher since March 28th after they bottomed out at the lowest levels in well over a year.  At the time, investors were tuned-in to the Fed's concerns about the global economy.  Granted, the US economy might not have been suggesting an imminent recession, but that was far more difficult to say about China and Europe.  Both economies were clearly decelerating by the end of 2018 and into the first few months of 2019.  That deceleration was the biggest risk factor for the global economy and the biggest boon for mortgage rates.

Mortgage rates continued higher for the 5th day in a row today.  This brings the average lender to the highest levels in exactly one month. At issue: a series of stronger economic reports at home and abroad have eased concerns about global growth.  Not only is a strong economy associated with higher rates in general, but those "concerns" were a big part of the Federal Reserve's decision to be more bond-friendly back in March.  With concerns arguably lessened by recent data, investors may be assuming the Fed won't be quite as bond friendly going forward.  All that having been said, the Fed is NOT likely to make any big changes after one solid month of global economic data.

Mortgage rates continued higher for the 5th day in a row today.  This brings the average lender to the highest levels in exactly one month. At issue: a series of stronger economic reports at home and abroad have eased concerns about global growth.  Not only is a strong economy associated with higher rates in general, but those "concerns" were a big part of the Federal Reserve's decision to be more bond-friendly back in March.  With concerns arguably lessened by recent data, investors may be assuming the Fed won't be quite as bond friendly going forward.  All that having been said, the Fed is NOT likely to make any big changes after one solid month of global economic data.

Mortgage rates rose again today, albeit at a slightly slower clip compared to yesterday.  Still, that's little consolidation considering this is the 4th straight day spent moving in that unfriendly direction.  The average lender is now back to levels not seen since March 19th.  On the bright side, March 19th's rates were the lowest in more than a year at the time.

So what's going on?

In general, the month of March saw the confluence of 2 great things for rates.  Not only was there a generally high level of concern/uncertainty surrounding the global economic outlook, but the Fed was also surprisingly helpful.  This was a bit of a double-edged sword because the Fed's helpfulness was predicated on that same sort of concern/uncertainty.  In other words, if events unfold in such a way as to ease that concern, not only would it push rates higher of its own volition, it also might result in the Fed being less helpful.

Mortgage rates continued higher to start the week, following a relatively sharp increase on Friday.  Interestingly enough, the underlying bond market was stable today.  In other words, it didn't suggest higher rates.  But the issue is that mortgage lenders adjust their rate sheets only a few times on the most volatile days.  Many of them didn't get around to it on Friday afternoon.  Those who did were greeted with another hour of bond market weakness before the week finally ended.

In other words, the underlying market was indeed suggesting we'd see mortgage rates roughly where they are today and lenders simply didn't have an opportunity to adjust their rate sheets accordingly.   This brings the average lender to the highest levels seen since before the Fed's rate-friendly announcement back on March 20th. 

Mortgage rates rose fairly quickly on Friday, depending on the lender and the scenario.  Bonds (which dictate mortgage rates and interest rates in general) weakened overnight on a variety of foreign and domestic data.  While we can't necessarily be sure that one particular development was more responsible for the move than another, we can observe that most of the damage followed news of surprisingly strong credit growth in China.  This could stand to reason given that China and Europe are central to the cautionary economic stance taken by the likes of the Fed.

Mortgage rates were arguably flat today for the average lender although a few were slightly higher or lower depending on their offerings from yesterday.  Markets, however, argued a slightly different case.

When we talk about "the market" with respect to mortgage rates, it's not quite the same as almost every other mention of "the market."  In rates' case, it's the BOND market that matters.  Indeed, bond prices and yields (another word for "rates") have a bigger impact on mortgage rates than any other variable.