Archive for the ‘Mortgage Rate Watch’ Category

Mortgage rates fell moderately today, helping them move part of the way back down toward their lowest levels in more than 3 months (seen back on Friday).  The average lender continues quoting rates that are roughly 3/8ths of a percentage point lower than the highs from early November.  

Last Friday's low rates marked the culmination of the strongest winning streak for rates of 2018.  We've been in a bit of a holding pattern since then, with next week's scheduled announcement from the Federal Reserve likely serving as the motivation for the next (and probably last) big wave of momentum for the year.  "Big wave" is more of a relative term, perhaps.  It may only end up being "big" relative to the current, fairly flat week leading up to it.

Mortgage rates rose more noticeably today as a part of a 3 day bounce after hitting the lowest levels in roughly 3 months at the end of last week.  Whereas yesterday's increases weren't really worth mentioning, today's hurt--depending on the scenario. 

In general, this bounce was to-be-expected.  Granted, we can't ever know exactly how big such bounces will be or how long they'll last, but when rates improve for as many days in a row as they recently had, a bounce is increasingly inevitable. So how bad is this one?

Mortgage rates rose almost imperceptibly today, with a few lenders not showing any detectable changes from yesterday.  Still, it was the first time since November 30th that rates were higher than the previous day (on average).  Today's move was so small that most lenders accounted for it in the form of upfront costs.  This means that borrowers would be quoted the same rate as yesterday, but with a small increase in upfront costs. For those who read yesterday's commentary (which said we may have just seen temporary lows in rates as the current move was running out of steam), none of this should come as a surprise.  In fact...

First things first: the average mortgage lender improved modestly today, compared to last Friday's levels. This leaves mortgage rates at their lowest levels in several months.  That's great news and indeed, the last few weeks have been the best few weeks we've seen in more than a year.  That having been said, we're now reaching the stage where the strong move in underlying financial markets may be running out of steam.

"Running out of steam" could mean one of several things.  In the best case, this is just the obligatory pause that almost all such market movements encounter before ultimately continuing in the same direction.  The less pleasant eventuality would be that today could mark the lowest rates we'll see for a while.  There's no way to know which variety we'll get, but history suggests sprinkling a bit more caution into your strategy if you're in a position to lock a loan.

Mortgage rates held on to their recent improvements today after the important Employment Situation (the big "jobs report") showed November job creation was lower than expected.  In general, weaker job creation is good for interest rates because it speaks to slower economic growth and inflation (both of which are enemies of rates).  This report was particularly important because a strong result would have cast doubt on several speeches from members of the Federal Reserve.  Those speeches have warned about slower economic growth in 2019 and the potential for fewer rate hikes than previously anticipated.  

Mortgage rates dropped significantly yet again today, adding to an already impressive week of improvement and bringing most lenders into their best territory since September 13th, 2018.  The average lender improved by more than an eighth of a percentage point in just the past 3 business days and by nearly 3/8ths of a point from the highs seen in early November.  This comes out to roughly $70/month for a $300k loan, or an upfront savings of $4500 if you were to buy your rate down (paying points) back in early November.

Mortgage rates technically hit their lowest levels in exactly 2 months yesterday.  Today merely takes them deeper into that territory.  The size of the improvement is less impressive and less meaningful compared to that "lowest in more than 2 months" talking point.   That said, taken in conjunction with the last 4 business days, the average lender is roughly an eighth of a percentage point lower.  That comes out to $7/mo for every $100k financed (or $21/mo on a $300k loan).

On a somewhat frustrating note, mortgage rates didn't experience nearly as big of a move as the broader bond market.  For instance, 10yr Treasuries--the most widely-used benchmark for longer-term interest rates) dropped 0.05% today.  Mortgages only managed to drop by 0.02% in terms of effective rates. 

Mortgage rates didn't really improve today for the average lender, but they did manage to hit the lowest rates in 2 months on a technicality.  The reason for this is simple.  There was a big gap between the rates seen on October 2nd and October 3rd.  Rates merely had to hold steady today in order to earn the "2-month" title.  

Despite the absence of mortgage rate movement, there were some encouraging developments behind the scenes.  When it comes to rates, 'behind the scenes' refers to trading in the bond market, and bonds managed to scratch out a solid day after starting out on weaker footing.  Typically, bonds need some inspiration for this sort of strength.  That can come from weaker economic data, weakness in stocks or other related markets, and even from geopolitical drama.  Today's strength, however, arrived without any obvious external prompt. 

Mortgage rates may have ebbed slightly higher today, but that only erased a fraction of the improvement seen over the past 2 days.  Combined with the even stronger showing 2 weeks ago, this makes November the best month of 2018 in terms of mortgage rate improvement. 

All of the good times come with a price, however, as the first few days of the month saw rates move to their highest levels in more than 7 years.  Nonetheless, anyone in the market to buy or refi has seen a meaningful improvement over the past 3 weeks. 

Mortgage rates may have ebbed slightly higher today, but that only erased a fraction of the improvement seen over the past 2 days.  Combined with the even stronger showing 2 weeks ago, this makes November the best month of 2018 in terms of mortgage rate improvement. 

All of the good times come with a price, however, as the first few days of the month saw rates move to their highest levels in more than 7 years.  Nonetheless, anyone in the market to buy or refi has seen a meaningful improvement over the past 3 weeks.