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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 Rapidly Recover This Week's Losses
One of the upsides of these weeks with boring, sideways movement in the rate market is that it doesn't take much of an improvement to undo several days of damage.  Today brought just such an improvement, and not for any compelling or interesting reasons either! The average lender began the day at lower levels--already close to the best levels of the week.  But as the bond market improved throughout the day, most lenders were able to make mid-day changes to their rate offerings.  After incorporating those changes into our daily average, it easily dropped to the best levels of the week. Volatility could increase slightly next week amid the presence of much more economic data.  The MOST relevant data won't show up until the first week of March, however, and that's when volatility risks are the highest, for better or worse.

  Mortgage Rate Watch

 1 week ago

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Mortgage Rates Just Slightly Higher
Mortgage rates continue making nearly microscopic movements in day-over-day terms, but they continue adding up.  Today's increase over yesterday was negligible, but yesterday matched the highest levels in more than 2 months.  That leaves today with the dubious distinction of being the new multi-month high, even though many borrowers may not see meaningful changes in today's rate quotes. There is little to observe or discuss until something significant happens.  We're most likely to see something significant in response to  scheduled economic data.  While we get that almost every day, there are only a small handful of reports that would be considered "top tier." At the moment, we're waiting at least two weeks for the next true top tier report (the big jobs report on Friday, March 8th). There are a few other honorable mentions in the meantime, but not until the 2nd half of next week.  That means unless something unexpected happens, we could see small day-to-day rate movement continue.  It's not glamorous or exciting, but it is what it is.

  Mortgage Rate Watch

 1 week 1 day ago

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Mortgage Rates Match Highest Levels Since Late November
In the short term, mortgage rates haven't experienced any extreme movement since earlier in the month, but a slow trickle of weakness is starting to add up.  As of last Friday, the average 30yr fixed rate was as high as it's been since late November.  There was a modest recovery yesterday, and it has now been erased by today's market movement. In other words, the average lender is now back in line with last Friday's rates--the highest since November 30th, 2023. That's the bad news.  The good news is that those rates are still almost a full percent lower than the long-term highs seen in October. Good, bad, or indifferent... where we're going is more interesting than where we've been.  That itinerary is constantly evolving based on incoming economic data and other events.  The biggest influences are still several weeks away.  We're just watching fine-tuning adjustments in the meantime. 

  Mortgage Rate Watch

 1 week 2 days ago

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Mortgage Rates Modestly Lower To Start The Week
Most mortgage lenders set rates for the first time this week on Tuesday (today) due to yesterday's holiday.  Federal holidays mean banks are closed which, in turn, means no activity in the part of the financial market that determines mortgage pricing.  Even though a majority of the U.S. financial system was closed yesterday, the rest of the world was open.  This occasionally results in volatility in rates on the first day after a 3 day weekend, but today is thankfully not one of those days. In fact, market movement was very calm with bonds improving just slightly compared to last Friday.  When bonds improve, mortgage rates are generally able to move down.  That is technically the case today, but the market movement was so small that the average borrower will not be seeing much of a difference in today's rates versus last Friday's. In the bigger picture, rates are still very close to their highest levels in more than 2 months following a series of higher inflation readings last week.  This week doesn't bring nearly as much economic data, which is a blessing and a curse.  On the upside, this decreases the potential volatility.  On the downside, it also means rates will have to wait for any inspiration to move lower.  The week's biggest risk in terms of scheduled events is Wednesday's release of the meeting minutes from the Fed announcement (3 weeks ago).  There's no reason to expect major fireworks considering the many Fed speeches between now and then, but it always makes sense to consider the potential for bigger moves following any major communication from the Fed.

  Mortgage Rate Watch

 1 week 3 days ago

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Mortgage Rates Jump to New 2024 Highs After Another Report Shows Higher Inflation
At present, the Consumer Price Index (CPI) and the jobs report are the two most important considerations for interest rate momentum as far as economic reports are concerned, But it wasn't always so.  For more than a decade leading up to 2022, (CPI) was not remotely as important because inflation ceased to be a major concern after 2010. Since 2022, we could view the Producer Price Index (PPI) in a similar light.  Sure, it's an inflation report, but it focuses on the more volatile wholesale side of the supply chain.  Markets continued taking cues from CPI while PPI bounced sharply higher and lower depending on the month.   All that began to change in late 2023 as PPI surged sharply lower, helping to build a case for inflation calming down.  Since August, we've seen more evidence of rates being willing to react to this previously unloved data. But the data can cut both ways.  PPI has spiked a few times in the past few months and today was the latest example.  In many ways, it adds insult to the injury already done by CPI earlier in the week. Thankfully, the market still isn't willing to move nearly as much for this report, so the damage was not nearly as big in terms of upward rate movement.  That said, the movement was still enough to take the average lender to the highest levels in over 2 months.

  Mortgage Rate Watch

 2 weeks ago

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Mortgage Rates Modestly Lower For 2nd Day in a Row
While weekly mortgage rate indices are pointing out the sharp jump from last Wednesday's levels, daily rates have fallen twice in a row.  The peak was on Tuesday after the Consumer Price Index sent rates to the highest levels in more than 2 months.  Yesterday's drop left us feeling cautious.  Today's was more grounded by relevant underlying events. Specifically, the day's most important economic data--retail sales--came in weaker than expected. That sounds like a bad thing, and it is if you're the U.S. economy, but what's bad for the economy is typically good for rates.   Retail Sales was far enough below forecasts that the bond market (bonds dictate day to day rate movement) improved immediately and noticeably.  This allowed the average mortgage lender to easily offer moderately lower rates compared to yesterday. All told, the improvements over the past 2 days have erased roughly half of the increase versus last week, but the average lender remains just above 7% for a top tier conventional 30yr fixed.

  Mortgage Rate Watch

 2 weeks 1 day ago

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Modest Recovery But Still Trending Higher
As is often the case, there are a few ways to look at rates at the moment.  In the medium term, we can still take heart in the fact that rates are about a percent lower than the long-term highs in mid-October.  In the shortest of terms, we might also be tempted to rejoice in the fact that rates moved slightly lower today, hopefully signaling that yesterday's big spike has been contained. Somewhere in between those two time frames, however, a clear trend is emerging.  Unfortunately, it's heading toward higher rates and the low levels from 2 weeks ago now look like a small outlier in that process. Fortunately, trends don't predict the future. They only tell us where we HAVE BEEN and not necessarily where we're going.  The latter is most likely to be determined by economic data and we have a fairly good installment on the way tomorrow morning.  Bigger reports have bigger potential to cause volatility, but we won't see those for several more weeks.  Between now and then, fans of low rates are hoping for tame economic data and for the uptrend in rates to level off while we wait for the main events next month.

  Mortgage Rate Watch

 2 weeks 2 days ago

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Mortgage Rates Just Got Smoked by Barn Burner Inflation Report
If it feels like there's been an inordinate amount of focus on the Consumer Price Index (CPI) recently, today proved it was justified.  It's not hard to understand WHY this data should matter.  After all, inflation is the biggest reason that rates moved higher at the pace seen in 2022/2023.  From there, we only need to know that CPI is the biggest market mover among inflation reports and the focus quickly makes sense. But that's not the only reason that today was highly consequential.  We were also in the midst of a bit of a correction in rates that took us from the best levels in 8 months to the worst levels in more than a month in the space of 2 days.  In not so many words, the bond/rate market was essentially asking itself if it had been caught flat-footed heading into February.  The jobs report on Friday, Feb 2nd said "yes!"  Now today's CPI data says "see?!" So what happened? It doesn't sound too interesting at face value.  Core month-over-month inflation came in at 0.4% for January as opposed to the 0.3% seen last month.  Markets expected it to hold steady, on average.  Small monthly changes are very important when it comes to CPI--especially if those changes make a new argument about the momentum of inflation.   Today's report was in a unique position to make it look like that momentum had been cooling since last September.  Instead, it now looks like it's rising back toward levels from early 2023.

  Mortgage Rate Watch

 2 weeks 3 days ago

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Mortgage Rates Steady to Slightly Lower Ahead of Big Inflation Report
After spiking to the highest levels in over a month last Monday, rates have held eerily steady.  To be fair, the steadiness started the following day after a moderate recovery that took the average conventional 30yr fixed rate from just over 7% to just below.   To put all of the above in perspective, that rate jumped by 0.41% from Thursday, Feb 1 though Monday, Feb 5.  The following day saw a decent correction of 0.08%, but the day over day change has been limited to 0.02% since then. If any event on the calendar has the power to change this calm, sideways slide, it's Tuesday morning's Consumer Price Index (CPI).  This is the biggest inflation report of any given month and one of the two biggest economic reports (the other being the jobs report that started that 0.41% jump just over a week ago). Whether CPI swings as hard as the jobs report remains to be seen.  All we can know ahead of time is that it carries the potential to send rates quickly higher or lower. Keep in mind that the market already knows 11 out of the 12 months used for any annual calculation.  It will not be a surprise to see headline inflation drop from 3.4% to just under 3%, nor will it be a surprise if core inflation drops to 3.7% from 3.9%.  The fact that 3.7% is still much higher than the 2.0% target will also not be news.  The focus is mainly on the "core" month over month number, currently expected at 0.3%. If that number comes in at 0.2% or lower, rates will likely improve.  0.4% or higher and rates will likely jump.

  Mortgage Rate Watch

 2 weeks 4 days ago

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Uneventful Day For Rates. High Stakes Next Week
Near the end of last week, the title of the daily mortgage rate article was "Rates Right in Line With Long-Term Lows, But That Could Change on Friday."  Indeed, rates ended up jumping in a big way--the biggest in more than a year. There was no clairvoyance involved, nor was it a lucky guess.  In fact, the intention of the headline was to point out that rates could go big in EITHER direction.  It was not destined to be the case, necessarily.  All we knew is that we would receive one of the two most important monthly economic reports the following morning and that interest rates routinely react to any big surprises in that report. The report in question was the employment situation (aka "the jobs report"), and if you've read anything about mortgage rates in the past week, you've seen the damage.  The other of the two big reports is the Consumer Price Index (CPI).  That comes out this coming Tuesday morning and carries just as much potential for volatility (in EITHER direction).  To be clear, it's not incredibly likely that rates would fall as much as they jumped last week, but a low CPI reading could make for a very good day for rates.  Conversely, a high CPI reading could send rates higher at a fast pace, but also probably not as fast as last Friday's.  We have to say words like "probably" and "potential" because the reality depends on exactly how the data arrives. 

  Mortgage Rate Watch

 3 weeks ago

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Mortgage Rates Uneventfully Higher
Mortgage rates were technically a hair higher today when compared with yesterday's latest offerings, but it's just as fair to say they've been unchanged since hitting recent highs on Monday.  That pattern lines up with the well-known predisposition for the bond market (bonds dictate rates) to focus on a handful of the most important economic reports.  The last important report came out on Monday. Economic data will give traders and the Fed the info needed to determine the next move for rates.  At the moment, they've come down quite a bit from October's highs, but have abruptly refused to go any lower without more convincing from the data. If the monthly Employment Situation (the big jobs report) is the biggest influence on rates in terms of economic reports, the Consumer Price Index (CPI) is not far behind.  The latest installment hits next Tuesday.   There's no guarantee that rates will stay fairly flat between now and then.  Surprises are always possible, but that's as fair a baseline as any.  The average top tier 30yr fixed rate is holding just under 7% for now.  It was over 8% briefly in October, and well into the mid 6's last Thursday.

  Mortgage Rate Watch

 3 weeks 1 day ago

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Mortgage Rates Largely Unchanged, Holding Tuesday's Improvements
Mortgage rates are based on trading in the bond market.  As we saw last week, trading in the bond market can often be very exciting, even if that excitement isn't always pleasant.  A rapid deterioration in bonds led to a rapid increase in rates. Other times, bonds can phone it in and skate by without making any serious commitment in either direction.  That's the best way to describe today's movement.  With one brief exception this morning, trading levels stayed well inside the range set yesterday (and yesterday's range was already vastly calmer than the previous day). If rates are based on bonds and if we've just confirmed a boring day for bonds, it's no surprise to find that it was a boring day for rates as well.  The average lender remained right in line with yesterday's mid-day levels, although there were outliers who changed their offerings a few times between now and then. Traders continue waiting for actionable data.  That was in light supply today and tomorrow won't be much better.  Drama can always unfold for reasons that transcend the event calendar, but if it's not on the calendar, it's hard to discuss those prospects.   What we do know is that a key inflation report is on the calendar next Tuesday morning.  It would not be a surprise to see rates continue attempting to hunker down until then.  This doesn't mean a complete absence of day-to-day movement--simply more muted movement than what we saw during the recent spike.

  Mortgage Rate Watch

 3 weeks 2 days ago

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Mortgage Rates Recover Modestly After 2 Day Rout
The past two business days (Friday and Monday) accounted for the 3rd largest increase in mortgage rates since March 2020.  Friday, specifically, was the fastest single-day spike in more than a year and 5th biggest spike since March 2020.  Even when massive fundamental change is happening, rates don't tend to maintain such a pace. At present, it would be a stretch to say that massive fundamental change deserves much credit for the past 2 days.  If anything, it was more of an adjustment to surprisingly strong economic data.  A slew of Fed speakers has confirmed as much during this time.  They've been reasonably unified in saying they still expect rate cuts in 2024, but not quite as quickly as the market had been expecting at the beginning of last week. With all of the above in mind, it's not a huge surprise to see a break in the unpleasant action.  While we can't yet be sure that rising rate momentum is finding a limit as opposed to simply taking the day off, we can at least enjoy the day off. Specifically, the average top tier 30yr fixed rate fell back below 7% today after cresting that level for the first time in more than a month yesterday.  Interestingly enough, the recovery was accomplished without any major underlying motivation.  This could speak to the absence of that "massive fundamental change" mentioned above (which would suggest less volatility relative to last week in the coming days).  

  Mortgage Rate Watch

 3 weeks 3 days ago

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Mortgage Rates Launched Back Over 7% by Strong Economic Data
Last Friday was the worst day for mortgage rates in over a year in terms of day-over-day movement (October 19th, 2023 remains the worst day in decades in terms of outright levels with 30yr fixed rates over 8%). Monday added insult to injury with another sharp increase that took the average top tier conventional 30yr fixed rate back over 7% for the first time since December 12th. In both cases, the most relevant catalyst was an upbeat economic report.  We already know that it was the big jobs report that did the damage on Friday.  Today's rate rout came courtesy of the ISM Non-Manufacturing PMI (aka ISM Services).  While it's lesser-known than the jobs report, ISM Services is one of only a handful of other reports worthy of sharing the stage as a supporting actor.  When it comes in much higher or lower than expected, rates almost always react. Rates are more sensitive than normal to economic surprises at the moment and they're on veritable high alert after last Friday.  Today's ISM data was only moderately stronger than expected at the headline level, but some components of the report (employment and prices) were much higher than last time.   After the data, the bond market (which dictates rates) immediately moved to the weakest levels of the day.  Weaker trading levels in the bond market prompted mortgage lenders to set their rates much higher today versus Friday afternoon.  In these two business days, the average lender is more than 0.40% higher in terms of top tier 30yr fixed rates versus Thursday afternoon.

  Mortgage Rate Watch

 3 weeks 4 days ago

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Biggest One-Day Jump in Rates in Over a Year
Mortgage rates were crushed by today's jobs report.  Nonfarm payrolls (the main component of the report), came in  significantly higher than expected (353k vs 180k forecast) and were revised up significantly for December (333k versus 216k previously). January's jobs data (the stuff released today) is often plagued by major departures from expectations because it's the one month of the year where the Bureau of Labor Statistics (BLS) implements new benchmarks based on a comprehensive count of jobs conducted in March of the previous year.   To understand this better, consider the changing composition of jobs over time.  BLS adjusts job counts based on how big a percentage a certain industry accounts for. Let's imagine social media were invented overnight and thousands of people quit regular jobs to become social media influencers.  Because there wouldn't be any track record of "social media influencer" in the BLS benchmarks in the first year, it would look like a lot of people lost jobs and didn't find new ones.  Then when BLS does the full count in March, they'd find that influencers were prevalent and the numbers would be revised.  If you'd like to see the actual changes in each industry category, BLS publishes the data here: https://www.bls.gov/web/empsit/cesprelbmk.htm  Benchmark revisions, alone, don't explain the wild results today, but they help explain why results have been a bit more wild than their normal range amid the changing landscape of the post-pandemic economy.  The more rapidly the composition of the economy changes, the more we'll see volatility like this in the numbers.  

  Mortgage Rate Watch

 4 weeks ago

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Rates Right in Line With Long-Term Lows, But That Could Change on Friday
"Long-term" is a subjective measurement, but in this case, it refers to the the past 7 or 8 months.  Today's mortgage rates dropped to levels that--until 2 other recent days in late December--haven't been seen since May, 2023. In other words, we're effectively at 8 month lows today, even if those lows aren't very different from the lows in late December. This week's precipitous drop came courtesy of factors other than the slate of economic data.  That's interesting because we'd been eagerly anticipating this week's econ data as a potential source of volatility.  Instead, it was a friendly update from the U.S. Treasury on its borrowing plans (something that can have a big, indirect impact on mortgage rates by altering the supply/demand equation in the Treasury market which then spills over into the mortgage market). All of the above means that Friday morning's jobs report is our first significant opportunity to see a big move in rates that's driven by economic data.  As is always the case ahead of this report, the reaction could easily take rates quite a bit higher or lower.  It can also thread the needle and keep things fairly flat.   The market is expecting the job count to drop to 180k from last month's 216k.  A lower number would likely keep low rates intact, and a much lower number would allow for new longer-term lows.  Conversely, a number over 200k would be more likely to put upward pressure on rates.  It's not uncommon for the actual number to come in roughly 100k away from the forecast level.  The farther from forecast, the likely we are to see the big reaction.

  Mortgage Rate Watch

 1 month ago

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Rates Drop Significantly on Fed Day, But Not Because of The Fed
This is a challenging day to attempt to understand the relationship between events and rate movement.  At the most superficial level, rates are much lower and it was a Fed day.  Because Fed days often cause big rate movement, it's logical to assume that rates are lower because the Fed "did something." We already know the Fed didn't cut rates today and that a Fed rate cut/hike is never an indication of 30yr fixed mortgage rates changing on the same day.  But we also know mortgage rates can react to other things the Fed says in the statement or press conference.   Even then, the Fed only caused some sideways volatility in the underlying bond market this afternoon.  Mortgage rates were already noticeably lower before the Fed, largely due to timing of yesterday's bond market improvement in conjunction with more bond market improvement this morning.  The latter is attributable to economic data and headlines regarding banking troubles for NY Community Bancorp.  There is even some bond market improvement in the afternoon (attributable to esoteric non-Fed-related events that have to do with month-end bookkeeping) that has yet to be reflected on many lenders' rate sheets. All of the above adds up to a very good day for rates with the average lender dropping in a noticeable way for the first time in weeks.  Additional gains will depend on the incoming economic data or, as we were reminded today, unscheduled events that cause concern in the market.

  Mortgage Rate Watch

 1 month ago

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What Will The Fed Do To Mortgage Rates on Wednesday?
Mortgage rates inched gently lower yet again today.  That's the 4th day in a row without moving higher, but it's just as fair to say rates have been broadly sideways for the past two weeks after moving up from 7 month lows seen in late December. Volatility has generally been muted as the market waits for bigger ticket data and events.  One event that always classifies as potentially major is the Fed's scheduled policy announcement tomorrow afternoon.  Indeed, some of the biggest swings in rates have been inspired by Fed days. It's quite common and also a mistake to view the big rate reactions as having anything to do with the Fed announcing a rate hike or cut.  If someone asks you tonight: "so... you think the Fed's gonna cut mortgage rates tomorrow?" they are misguided on two levels. First off, the Fed doesn't directly set mortgage rates.  The Fed sets the Fed Funds Rate, which applies to the shortest possible time frames.  Mortgage rates apply to mortgages that last years (even after accounting for average sale/refi time).  Obligations measured in years behave differently when compared to overnight obligations such as those subject to the Fed Funds Rate. Secondly, the Fed will most certainly neither hike nor cut rates tomorrow.  This is as much of a certainty as anything in the future ever is in the world of interest rates.  If the Fed is to have an impact on mortgage rates tomorrow, it would only be due to the market's interpretation of comments pertaining to the future.  The text of the official announcement is an unlikely venue for such comments, so they could only come from the 2:30pm press conference with Fed Chair Powell.

  Mortgage Rate Watch

 1 month ago

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Nice Calm Day For Rates, But Volatility Potential Increases From Here
Mortgage rates are in the midst of a bit of a winning streak, but it's about as small and as neutral as winning streaks get.  Today was the third day in a row where the top tier, conventional 30yr fixed rate was at least as good a the previous business day.  The catch is that there's not much difference between today's rates and the recent peak from 4 days ago.   There's been a lot of momentum behind the notion that rates will continue to fall in early 2024 after dropping sharply in late 2023.  Instead, we've seen a classic, subdued correction off the longer-term lows from mid December.  The size and timing of the correction make great sense considering the size and timing of the big drop that preceded it. From here, the next thing that makes great sense is for rates to follow the guidance of the incoming economic data  first and foremost.  Comments from the Federal Reserve will be a supporting actor until the March Fed meeting.   In other words, we have a Fed meeting coming up in 2 days and we DON'T expect there to be any major fireworks.  This week's only pyrotechnic potential comes in the form of several key economic reports in addition to the Treasury department's update on its borrowing needs.  Treasury borrowing affects mortgage rates indirectly because it directly impacts the "supply" side of the supply/demand equation.  If Treasury doesn't need to borrow as much, Treasury yields fall.  Lower Treasury yields correlate with lower mortgage rates, all other things being equal.

  Mortgage Rate Watch

 1 month ago

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What's At Stake With The Upcoming Fed Meeting?
Over the past 2 months, speculation ramped up quickly regarding the pace and magnitude of Fed rate cuts in 2024. Next week brings the first Fed meeting that's in the realm of that speculation. Some pundits went so far as to mention a chance of a rate cut as early as the January meeting.  Could that happen and what would the implications be of rate cuts in general? First off, the market doesn't really believe this will happen.  There were a few days where some of the trades in Fed Funds Futures suggested an outside possibility of a January rate cut, but that has since been priced out of the market. There has certainly been a shift in the market's assessment of the Fed's stance.  It took place with strong momentum in November and December. The Fed itself added to the momentum with the rate-friendly announcement on December 13th. Since then, however, we have not seen the sort of economic data necessary to fulfill the conditions of a Fed rate cut cycle.  This isn't to say it can't happen in 2024--only that it's too soon to debate.  At the very least, we know we haven't met those conditions yet. But what about core inflation returning to 2%?  After all, that's the Fed target and this week's GDP data did show core PCE at 2% quarter-over-quarter. This is not an optical illusion, but it's important to understand the 2% inflation target is an annual metric.  The chart above shows lots of promise based on Q4 of 2023.  Now we need to make sure 2% inflation sticks around so the annual chart can align with the quarterly chart.

  Mortgage Rate Watch

 1 month ago

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