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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.

Pros of conventional loans

  • 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

Cons of conventional loans

  • 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

Who are conventional loans best for?

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 End Week Lower Thanks to Jobs Report
The average top tier 30yr fixed rate may not be back under 7% just yet, but as of Friday, it is back below the levels seen last Friday.  That fact is at odds with major weekly rate surveys which showed a somewhat significant increase, but those surveys came out before today's jobs report. Officially known as The Employment Situation, the jobs report is one of the two most important pieces of scheduled monthly economic data in the U.S.  Econ data is always important, but that's doubly true these days as the Fed and the market waits for confirmation that economic growth and inflation are slowing down enough for the Fed to cut rates.   The market often moves well in advance of the Fed when it comes to rates.  Today's jobs report wasn't especially weak, but it represented an obvious downshift compared to last month's installment.  The bond market agreed as traders pushed yields moderately lower in the AM hours. Bonds dictate mortgage rates.  Falling yields coincide with falling mortgage rates.  Again, today's move wasn't big, but it was important in the sense that it leaves the door open for another major economic report to send an even clearer message about progress toward the Fed's rate cutting goals.  That report--the Consumer Price Index (CPI)--comes out next Thursday morning.

  Mortgage Rate Watch

 1 week ago

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Mortgage Rates Move Lower After Weak Service Sector Report
"Data dependent" is one of the most common phrases heard from the Federal Reserve these days when it comes to rate-setting policy.  And while the Fed doesn't directly dictate mortgage rates, the bond market tends to trade the same data that the Fed cares about. Today's key report, the ISM Services index, isn't quite at the top of the Fed's list, but it's a longstanding market mover when it comes to bonds and, thus, rates. Today's installment was much weaker than expected.  Weak data correlates with lower rates, all other things being equal. Bonds improved immediately after the release.  This allowed mortgage lenders to set lower rates today.  Some lenders had already published their initial rates for the day and several of them ended up issuing positive reprices before the end of the day. The bond market is closed tomorrow for the holiday, but will be back to digest an even more important economic report on Friday morning: the big jobs report.

  Mortgage Rate Watch

 1 week 2 days ago

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Mortgage Rates Finally Find a Ceiling, For Now
As is often the case with internet headlines these days, the headline overstates the reality on the ground--or at least over-dramatizes it.  Considering the last notable "ceiling" was seen less than a month ago and that the last short term ceiling, less than a week ago, the word "finally" probably doesn't apply.  And then there's the word "ceiling" itself.  In this case, it's used only because there isn't one convenient word to say "a day where mortgage rates moved at least slightly lower after 2 or more days spent moving noticeably higher."   In other words, that happened today. It's refreshing or reassuring any time rates stop moving higher after a somewhat abrupt jump remains in place for more than a day.  In the current case, the past two days merely look like slightly bigger continuations of a gentle uptrend in rates that's been in place since mid June. From here, economic data will take center stage with important reports on each of the remaining two mornings of this week (Thursday is closed for Independence Day). Of those, it's Friday's jobs report that has far more power to cause volatility.

  Mortgage Rate Watch

 1 week 3 days ago

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Mortgage Rates Near Highest Levels in More Than a Month
Mortgage rates continued their frustrating and somewhat perplexing move higher today, thus bringing the average lender close to the highest levels since the end of May.  Rising rates are always frustrating for those the housing/mortgage markets and prospective borrowers, but an ebb and flow is a way of life.  In other words, it's perfectly normal to see good and bad days for rates. Less normal is the occasional emergence of counterintuitive rate movement.  In other words, we are usually able to tie any given drop or surge in rates to one or more root causes that have had similar impacts in the past.   This time around, however, the economic data has been suggesting DOWNWARD pressure on rates over the past two days.  That's notable for two reasons: economic data has been a reliable source of guidance and, more importantly, rates have experienced anything but downward pressure over the past two days! There are a few ways to account for the paradox, but at this point, most conversations include some speculation about the political impact on rates after last week's presidential debate.  Connecting the dots from those conclusions to the market movement is a rather complex task and it relies on several assumptions that can't be predicted with a high degree of certainty.  As such, we'll dig deeper in the event the narrative continues causing problems for rates.  For now, just be aware that it may be a source of counterintuitive pressure, but one that should still be trumped by the major upcoming economic reports.

  Mortgage Rate Watch

 1 week 4 days ago

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Mortgage Rates Are Actually Higher This Week
The week began with a distinct absence of interest rate volatility, but things changed in a big way by Friday--at least compared to the previous week which was exceptionally quiet.  In the bigger picture, however, it was just another week that felt volatility in the short term due to a surprising rate spike on Friday. Incidentally, the fact that this week's rate spike occurred at the end of the week means that Freddie Mac's weekly mortgage rate index missed detecting the shift.  More timely daily data shows average mortgage rates trending slightly higher this week as opposed to lower. The most eagerly anticipated data was the PCE price index for May.  This is a similar measure of inflation to CPI (the Consumer Price Index) that came out 2 weeks ago.  Core PCE, which excludes more volatile food and energy prices, was even more favorable for the inflation outlook. The chart above may make it seem that inflation has returned to the target level, but success is measured by the year over year numbers hitting 2%.  The Fed has indicated it would consider rate cuts when it was more confident about hitting 2%.  We're definitely not there yet, but arguably getting closer. Friday afternoon saw an abrupt reversal in rates tied to the compulsory trading that often creates volatility at the end of a month/quarter (Friday was both).  There is no rhyme or reason to month-end trading when it comes to a typical impact.  In other words, it can be good or bad for rates.  We don't get to know ahead of time.  This time it was bad.

  Mortgage Rate Watch

 2 weeks ago

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Mortgage Rates Steady to Slightly Lower
Mortgage rates rose at the fastest pace in 2 weeks yesterday, but that wasn't a very tall order considering an almost perfect absence of movement leading up to that.  Now today, a good amount of that small amount of damage has been undone. Bonds responded favorably to this morning's economic data, which suggested the labor market could be in the process of softening a bit, and that companies were less likely than expected to make big purchases in May (not including aircraft and defense spending). Bonds thrive on bad news for the economy (and bonds drive interest rates).  While this wasn't the worst news in the world, it was far enough from forecasts to spur a modest rally in bonds and rates.   The top tier conventional 30yr fixed average remains just a hair over 7% for most lenders.  Bigger changes are possible in the coming days/weeks as more important economic data will be released. 

  Mortgage Rate Watch

 2 weeks 1 day ago

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Mortgage Rates Moving Up a Bit
After operating in an exceptionally narrow range since the beginning of last week, mortgage rates finally started doing something a bit different today.  Unfortunately, the differences result in a more noticeably move higher. Rates often respond to major economic data and other important developments that have a bearing on the bond market (rates are ultimately primarily a function of bond trading levels).  That said, there were no great examples of the typical "important developments" behind today's move.  That's one of the reasons that the move was fairly small relative to other notable examples. Top tier conventional 30yr fixed rates only moved up a few hundredths of a percent and not every borrower would see much of a difference from yesterday.  The next two days bring data and events that stand a bit better chance of inspiring a reaction, but we don't really get to the biggest risks/opportunities until the first two weeks of July.

  Mortgage Rate Watch

 2 weeks 2 days ago

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The Miraculously Sideways Streak Continues
Mortgage rates have been flatter than the earth according to the flat earth society.  Much like the actual earth in many areas in the middle of the country--and especially Florida--things can be flat for as far as the eye can see, but the farther one moves along, the more they'll see the contour. For now, though, mortgage rates are in Florida (or IL, ND, MN, etc...).  Conventional 30yr fixed rates inched up 0.01% from yesterday--effectively unchanged and in the same tight range of 7.01 to 7.04 seen since last Monday. Much like the actual geology of the planet, this isn't a conspiracy.  It's just the way things are relative to what we can see around us.  It will change, but not until markets are forced to confront mountains of more important economic data and events.   Tomorrow's events have only a slightly better chance of forcing the bond market (and thus, mortgage rates) to make bigger moves.  Friday continues to be the biggest risk/opportunity, but it's really the following 2 weeks of data that are almost certainly destined to deliver peaks and valleys.

  Mortgage Rate Watch

 2 weeks 3 days ago

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Mortgage Rates Remain Exceptionally Flat for 4th Straight Day
Most mortgage lenders offer mortgage rates in increments of 0.125% (i.e. 6.875, 7.0, 7.125, 7.25, etc.).  As such, a particularly notable day of mortgage rate movement is one in which we see close to a 0.125% change.  After all, that's what it would take for the average borrower to see a significant change in the prevailing rate quote. This doesn't mean smaller moves don't hurt, only that they tend to impact implications for upfront costs rather than the quoted rate itself.  Specifically, last Monday, when rates jumped from 6.99% to 7.04%, the average borrower would be quoted a rate of 7.00% in both cases, but on the 7.04% day, closing costs would have been higher, all other things being equal.  With all of the above in mind, ever since last Monday, the average top tier conventional 30yr fixed rate hasn't moved mover than 0.02% on any single day and for the past 3 days, not more than 0.01%.  That's a staggering level of "sideways-ness."  It hasn't been for a lack of potential motivations either.  During that time, several economic reports were released that have managed to cause much bigger reactions in the past.  If they didn't this time, it's because the market is eagerly waiting for confirmation (or lack thereof) that the most recent round of inflation data is signaling a shift that allows rates to continue moving lower.   That data only comes out every so often, and only once a month in the case of the most important inflation report: the consumer price index (CPI).  We're still several weeks away from that one, but some of the other data is up to the task of causing some volatility between now and then.  The only catch is that almost all of it arrives next week.

  Mortgage Rate Watch

 2 weeks 4 days ago

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June Shaping Up Nicely, But Bigger Tests Are Yet to Come
After a rocky start to the year, things began to improve for rates and the inflation outlook in May. June took the improvement to the next level, but this week didn't affect the bigger picture. Ahead of Wednesday's market closure for Juneteenth, the most relevant economic report was Retail Sales on Tuesday morning.  It came in slightly below forecast and the previous month was revised lower.   Rates responded by moving back toward recent lows, but not below them. Some sources suggest mortgage rates are in fact at multi-month lows, but this relies on Freddie Mac's weekly survey which is notorious for modest inconsistencies with reality due to the timing and methodology of the survey.  In both 10yr Treasury yields and mortgage rates, the reality has been more of a sideways fizzle as opposed to additional improvement. Apart from Retail Sales, Friday's PMI data from S&P Global caused the most notable market reaction after coming in at the strongest levels in more than 2 years--albeit, just barely. Stronger economic data tends to coincide with rates moving up.  Using 10yr Treasury yields as a convenient intraday benchmark for mortgage rate momentum, we can see the impact relative to Retail Sales earlier in the week.  Neither were remotely on the scale of last week's CPI data.  Additionally, they each argued opposite cases, thus helping the rate range remain subdued for now. In other words, most of June's progress was already in place before this week began.  It gets rates within striking distance of a longer term uptrend--one that will be hard to definitively break unless June's forthcoming economic data paints a picture of economic weakness and lower inflation.  It will be several weeks before most of June's data starts coming in.

  Mortgage Rate Watch

 3 weeks ago

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Mortgage Rates Unchanged Versus Tuesday's Levels
The bond market was closed on Wednesday for the Juneteenth holiday.  As such, mortgage lenders were either closed or unable to update mortgage rates based on market movement.  Today's rates are perfectly in line with Tuesday morning's, on average, even though the bond market is slightly weaker.   Weakness in bonds refers to lower prices and higher yields/rates.  Mortgage rates almost always move with the bond market, but when the movements are small, there can be exceptions.  That's the case today as the losses leave mortgage-backed bonds right in line with the levels seen on Tuesday morning.  Bonds did move on to stronger levels by Tuesday afternoon, but not to a sufficient extent for most lenders to update their pricing. The net effect is an average top tier conventional 30yr fixed rate that's still a hair above 7%.  

  Mortgage Rate Watch

 3 weeks 1 day ago

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Mortgage Rates Move Slightly Lower After Retail Sales Report
Mortgage rates began the week with a modest move back up and over the 7% threshold, but managed to erase some of those losses today.  The improvement followed this morning's Retail Sales data which came out weaker than expected. Mortgage rates are based on trading levels in the bond market.  Bonds pay attention to multiple cues at any given time.  Major economic reports are always among those cues as the health of the economy tends to coincide with rates (i.e. stronger = higher).  Retail Sales isn't as big of a report as the Consumer Price Index (CPI) or The Employment Situation (the jobs report), but it's a respectable supporting act.  Sales growth was surprisingly high in the data that came out in March and April.  May's report showed a correction back to 0.0% growth.   Today's report came in just barely positive at 0.1--a far cry from the 0.6 level 2 months ago and below the median forecast of 0.2.  In addition, it included a revision to May's report from 0.0 to -0.2.  All told, it painted a less upbeat picture for the American consumer compared to a few months ago. A slower economy is less able to sustain higher interest rates for a variety of reasons--not the least of which being the suggestion of slower price growth.  With that, bond traders bought more bonds, thus pushing bond prices higher and yields (aka "rates") lower.  Tomorrow is a market closure for the Juneteenth holiday.  Trading resumes on Thursday but we'll be waiting until the end of next week for the next round of big ticket economic data.

  Mortgage Rate Watch

 3 weeks 3 days ago

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Mortgage Rates Back Above 7% to Start New Week
Mortgage rates moved modestly higher to start the new week.  With the average top tier 30yr fixed rate just under 7% on Friday, this meant a move to just over 7% today.   As always, keep in mind that a mortgage rate index is best used to capture the day to day  movement in rates as opposed to outright levels.  The latter can vary significantly depending on credit score, equity, occupancy, discount points, and lender margins. There weren't any interesting or compelling developments driving today's bond market movement (bonds dictate mortgage rate momentum).  It was an uninspired, uninteresting Monday without any significant economic data or bond market volume.  Things should be more interesting tomorrow, for better or worse, due to the release of the Retail Sales data at 8:30am ET.  While this isn't in the same league as the jobs report or the Consumer Price Index, when Retail Sales come in much higher or lower than forecast, there's often a noticeable reaction in rates.

  Mortgage Rate Watch

 3 weeks 4 days ago

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Mortgage Rates Remain Close to Recent Lows Despite Modest Bump
Today saw the average conventional 30yr fixed rate rise ever so slightly for top tier scenarios.  Most lenders are still quoting those scenarios just under 7%.  Depending on the specific details of any given scenario, rates range from the mid 6's all the way up to the mid 7's.  Unlike each of the past two days, there weren't any major flashpoints for the bonds that underlie mortgage rate movement today.  There were a few economic reports, but neither had a big impact on the market.  All in all: a very calm and boring day--especially compared to almost any other day since last Friday. From here, the market will wait for the next big ticket economic report: Tuesday's Retail Sales.  There are a smattering of other reports next week, punctuated by a holiday closure on Wednesday for Juneteenth. The biggest, most significant movement likely still depends on the economic reports that we just saw and won't see again for nearly a month.  It wouldn't be a surprise to see a more sideways, slightly choppy trend between now and then.

  Mortgage Rate Watch

 4 weeks ago

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Mortgage Rates Little Changed at Lowest Levels Since March
You'd have to go back to March 28th to see the average mortgage lender offering a lower rate on a top tier, conventional 30yr fixed scenario than they're offering today.  The same was technically true yesterday and today's rates were just a hair lower. That said, some lenders have done things differently over the past 24 hours due to yesterday afternoon's market volatility.  Bonds lost enough ground after the Fed announcement for some lenders to reissue rates at slightly higher levels.  Those lenders were noticeably improved this morning, but not much better than yesterday morning's levels. Today's helpful data included another friendly reading on inflation--this time at the wholesale level as opposed to yesterday's consumer-level report.  In addition, Jobless Claims rose to the highest levels since last summer.  Weak economic data is generally good for rates, but the claims data raised questions about seasonal distortions.  This is the same timing as last year's uptick in claims, which suggests the seasonal adjustment factors might not be perfectly dialed in for an evolving labor market. For this and several other reason, the bond market will be reluctant to push rates lower at a fast pace until traders can be sure the data is confirming a bona fide economic shift in addition to a high likelihood of a return to 2% annual inflation at the core level.

  Mortgage Rate Watch

 4 weeks 1 day ago

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Mortgage Rates Drop Sharply After Inflation Data (But Bounce a Bit After The Fed Announcement)
It was an incredibly high consequence day for the bond market and, thus, mortgage rates due to the confluence of two extremely important events. The first event was the monthly release of the Consumer Price Index (CPI), which is one of the two economic reports with the far more power to influence interest rates than any other.  The other report is the big jobs report that came out last Friday.  As much as the jobs data hurt, today's CPI helped.  It brought the average top tier 30yr fixed scenario down under 7.0% by a hair--one of the biggest single day drops in months. The good times lasted, but they got less good after the afternoon's Fed announcement.  To be precise, it wasn't the announcement itself, but rather the Fed's updated rate projections that did most of the damage.  After the last round of projections (in March) showed 3 rate cuts in 2024, today's only showed 1.  This wasn't too terribly different from what the market expected, but it was slightly more conservative than hoped.   At the very least, traders didn't find anything in the projections nor in Fed Chair Powell's press conference to suggest that the good times should keep on rolling after already having been so good in the morning hours.  Bonds ultimately retraced about half of their gains and several mortgage lenders had announced late-day rate increases by 4pm Eastern Time.   Lenders who didn't bump rates a bit higher this afternoon would need to account for the bond market movement in tomorrow's rate offerings, assuming the bond market doesn't move too much overnight or early tomorrow morning.

  Mortgage Rate Watch

 1 month ago

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Mortgage Rates Barely Budge For 3rd Straight Day, But That Should Change Tomorrow
Today's mortgage rates were fairly close to yesterday's at the average lender for the 3rd business day in a row.  Friday was the last day with any substantial movement when rates spiked following the upbeat jobs report.  Since then, the average lender has only moved by 0.01% on each of the past 2 days. The absence of movement made better sense yesterday.  Rates are based on trading levels in the bond market and bonds ended the day very close to Friday's levels.  It's a bit harder to reconcile today given that bonds did quite well--especially after the auction of 10yr Treasury notes at 1pm Eastern time. Mortgage rates are often discussed against a benchmark of a 10yr Treasury yield.  The two tend to move in the same direction by generally similar amounts.  10yr Treasury yields are 0.07% lower today and the average mortgage rate is only 0.01% lower at the time of this writing.  What's up with that? First off, Treasuries tend to see bigger upsides and downsides when bonds are reacting to a Treasury auction.  Timing is also a factor with the auction happening late in the day.  Several mortgage lenders have already revised their initial rates lower in response, but the improvements won't be captured in our rate index until tomorrow. That brings us to another issue: tomorrow is a potentially crazy day for better or worse.  Well before mortgage lenders publish rates for the day, the Consumer Price Index (CPI) will be released for the month of May.  It has more power than any other economic report to push rates higher or lower, depending on the outcome.  Anticipation of that volatility could also have mortgage lenders feeling less like making any last minute changes.

  Mortgage Rate Watch

 1 month ago

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Mortgage Rates Slightly Higher to Start Pivotal Week
There's been a noticeable uptick in mortgage rate volatility over the past two weeks with a quick spike at the end of May, a nice drop in early June and then another spike last Friday following the jobs report.  Of course everything's relative, so in objective terms, it was roughly a 0.30% round trip for conventional 30yr firxed rates.   Today's move is microscopic by comparison with the average lender only 0.02% higher from Friday.  That's not too surprising considering the lack of actionable data on the calendar for bond traders (bond market movement drives day to day mortgage rate movement). All that is about to change.  The event calendar ramps up quickly from here and Wednesday will be the most important day of the month due to the release of pivotal inflation data and an updated rate announcement and outlook from the Fed.  While there's no chance of a rate cut or hike at this meeting, we should get more clarity on the Fed's interpretation of the very latest trends in inflation.

  Mortgage Rate Watch

 1 month ago

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Rate Optimism Put To The Test by Jobs Report
There's a strong case to be made for the fact that interest rates had a sunny predisposition this week.  In practical terms, that simply meant giving more credence to rate-friendly news and trying harder to overlook unfriendly news. But the predisposition was put to the test in a major way with the week's most significant economic report today.  Nonfarm Payrolls (NFP) is the headline component of the Labor Department's Employment Situation report.  There are many reports that pertain to the jobs market, but this one is infinitely more important than the rest and this time around, NFP came in much higher than expected. While the chart of nonfarm payrolls looks range-bound, and while the job count has been much higher in the past few years, Friday's result of 272k represented an uncommonly large "beat" versus the median forecast of 185k, and a big jump from the previous reading of 165k. A move like this makes it seem like the labor market is too resilient to offer much help to the inflation problem (more jobs, more money, more spending, etc.).  Finally, the bond market's sunny outlook saw a cloud too big to ignore. With that, mortgage rates had their first (and only) motivation of the week to move higher.  But the chart above also illustrates the silver lining.  Specifically, even though rates jumped on Friday, they're not even halfway back to last week's highs, let alone the higher highs seen at the end of April.  Part of the justification for such resilience is that the bond market will defer to inflation data (and the Fed's interpretation of it) above all else in deciding how worried to be about impediments to lower rates.

  Mortgage Rate Watch

 1 month ago

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Mortgage Rates Hold Steady Ahead of Important Economic Data
The outcome of certain economic reports will determine whether the next big move in interest rates is higher or lower.  Two reports are more important than all others in that regard and we'll get both of the them by next Wednesday. Tomorrow's jobs report is the more pressing matter.  It may not be quite as important as next Wednesday's Consumer Price Index (CPI) these days, but it has plenty of power to make or break the day for rates. Today's data was far less consequential by comparison and bonds coasted sideways after a very respectable winning streak over the past 5 business days.  Bonds dictate day to day movement for interest rates.  As such, today's mortgage rates were unsurprisingly right in line with yesterday's. 

  Mortgage Rate Watch

 1 month ago

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