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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 Effectively Unchanged Yet Again
Mortgage rates reached their highest level of the week on Wednesday and haven't really moved since then.  Technically each subsequent day saw a microscopic reduction in the average top tier 30yr fixed rate, but the average borrower would likely be seeing the same quote all three days. This flat trajectory contrasts sharply with the first two days of the week.  At the time, Monday and Tuesday were cause for concern as there were no obvious catalysts for that level of movement.  These past 3 days suggest rates are content to wait for the next big motivation from current levels, hopefully. Why "hopefully?"  Because there's never any way to ensure the future will behave as the present suggests when it comes to financial markets.  So what can we know?  There are a few things. We know that rates moved a lot higher over the past 4 weeks than the average media coverage suggests.  Mainstream weekly surveys only show a spike of about 0.40%.  The actual spike in daily average rates was over 0.70%.   We also know that next week's jobs report (on Friday) is a huge source of potential volatility, for better or worse.  After that, the election and the Fed announcement can have a major impact the following week.  

  Mortgage Rate Watch

 1 week 2 days ago

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Mortgage Rates Finally Win One, Albeit a Small One
Mortgage rates have risen every day since October 15th and some of the jumps have been fairly big.  That followed an even bigger increase earlier in the month with the whole ordeal accounting for a 0.72% increase in 30yr fixed rates since October 1st. Today's trading session offered a break from the recent trend with bonds improving overnight and holding onto those gains long enough for mortgage lenders to improve their offerings by the smallest of margins.  In other words, rates were basically unchanged, but for the hair splitters, technically lower. The movement isn't the interesting part of the day, however.  Rather, it's the fact that the morning's economic data made a case for higher rates and the bond market (bonds dictate rates) was able to stay in stronger territory nonetheless.  Part of that has to do with the data in question.  It's not on the same level as something like next Friday's jobs report. But part of it could be a sign that recent upward momentum in rates is starting to fizzle out.

  Mortgage Rate Watch

 1 week 2 days ago

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Mortgage Rates Tick Up to Another Multi-Month High
Mortgage rates have been moving two directions recently and both of them are "up."  Only the pace changes.  Today's pace was modest to moderate, but because we were already at the highest levels since late July, the same is obviously true for today. There were no standout market movers in play today on the economic calendar.  The bond market (which dictates rates) has simply been engaged in an ongoing attempt to move toward higher rates amid a variety of potential threats in the coming days and weeks.  To whatever extent these threats don't materialize, there would be room for rates to recover. Threats include election-related volatility, key economic data, and the Fed's next policy announcement. Average 30yr fixed rates quickly find themselves back near 7%.  Our index is at 6.92%, which means a majority of lenders are offering either 6.875% or 7.0%.  As always, remember that this is a broad, top tier index rate and that actual, individual scenarios can be vastly different depending on the details. 

  Mortgage Rate Watch

 1 week 3 days ago

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Mortgage Rates Much Steadier Today, But Still a Bit Higher
Mortgage rates jumped to their highest levels since late July yesterday.  Underlying market movement wasn't readily attributable to any singular headline or economic report.  Leading theories involve changes in election odds and more esoteric aspects of the bond market's plumbing. The damage was much easier to quantify as it resulted in one of the bigger single day jumps seen in 2024 and certainly the biggest jump that occurred in the absence of an immediately obvious, quantifiable reason.   Today was much calmer although the average lender dialed rates up just a hair more. The day over day change was a modest 0.03%, bringing the average 30yr fixed rate up to 6.85% on top tier scenarios.   In general, it's a good idea to plan for additional rate volatility through the first half of November at the very least.  

  Mortgage Rate Watch

 1 week 4 days ago

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Rates Jump Quickly to Highest Levels Since July
By the smallest of margins, mortgage rates are back up to levels last seen in July.  That means we've gone from being fairly close to 6% in mid-September to being nearly as close to 7% today when it comes to top tier 30yr fixed scenarios for the average lender. Today's jump was particularly quick and frustratingly lacking in satisfying explanations.  It's not the explanations make bad news any more palatable, but it's always more frustrating to be confronted with unpleasantness that seems to be happening for no good reason. There are several theories, but nothing as obvious or demonstrable as a surprise result in a key piece of economic data.  These include things like shifting election odds coupled with assumptions about policy impacts, arcane calendar issues surrounding the options market, and one of several research notes regarding U.S. deficits that have been making the rounds.   It's unlikely that any of these factors could exclusively drive the pace of weakness seen in rates today.  There are limited examples of several such factors teaming up to cause days like today, but just as often, something else comes to light in the following days that helps flesh out the explanation. Explanations aside, it was one of the bigger jumps seen in the past few months, and by far and away the biggest jump seen on a day without a big economic report or other scheduled event.

  Mortgage Rate Watch

 1 week 5 days ago

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Mortgage Rates Mostly Steady This Week After Uneventful Friday
There hasn't been much day to day movement in mortgage rates after the big jump caused by the jobs report earlier in the month.  That jump ended on Monday the 7th and the average 30yr fixed rate hasn't moved more than 0.06% since then.  For context, we wouldn't consider a short term move to be significant unless it was at least twice as big (the jobs report reaction was 6 times bigger at +0.36%). Today was the smallest move of the week with Friday's average rate holding perfectly in line with Thursday's and only 0.04% above last Friday's latest levels.  In other words, it was a perfectly flat day on what was already a fairly flat week. This will certainly change.  The only question is by how much.  To a lesser extent, the question may be "when?"  But in all likelihood, the next big move will arrive between November 1st and November 6th due to a confluence of massively important events including the jobs report, presidential election, and Fed rate announcement.  As always, there's know way to know how these events will play out ahead of time, only that the rate reaction could go big in either direction.  

  Mortgage Rate Watch

 2 weeks 1 day ago

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Mortgage Rates Move Higher After Stronger Economic Data
Mortgage rates are driven by the bond market and bonds consistently take cues from economic data.  Traders have been waiting on this Thursday's economic data ever since last Thursday, largely because there haven't been any major reports between now and then. The market constantly tries to adjust based on whatever it thinks it can know ahead of time.  That means that the median forecast among hundreds of economists for any given report tends to be reflected in the bond market well before the report in question is released.  Then on release day, the market reacts to deviations from the consensus. In today's case, all 3 of this morning's key reports were stronger than expected.   Jobless Claims dropped to 241k for the week.  Both last week's level and this week's forecasts were 260k. The Philly Fed Business Outlook Survey came in at 10.3 versus a median forecast of 3.0 and a previous reading of 1.7. Retail Sales rose 0.4% vs a 0.3% forecast and 0.1% in the last report. Immediately following the release of the data (all 3 hit at 8:30am ET), the bond market lost ground.  That means bond prices fell and yields (aka "rates") rose.  Mortgage lenders then base their rates for the day on the trading levels in the bond market.  Unsurprisingly, that meant the average lender moved back near their highest recent levels for a top tier conventional 30yr fixed scenario. The silver lining is that rates are still technically in the same range seen over the past week and a half, but that range is quite a bit higher than September's.  

  Mortgage Rate Watch

 2 weeks 2 days ago

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Mortgage Rates Hold Steady Ahead of Retail Sales Data
Mortgage rates have been holding in a fairly narrow range since the middle of last week and today was one of the least interesting additions to the trend.  The average lender is essentially unchanged versus yesterday, up a mere 0.01%, but down 0.02% from last Friday. Mortgage rates are primarily a function of trading levels in the bond market.  Bonds respond to a variety of motivations, but the biggest risks and opportunities are tied to major economic reports. With that in mind, it's no surprise to see a general lack of movement recently as last week's only major economic data was inconclusive.  Tomorrow morning brings the first potentially significant data of the week with several reports being released at 8:30am ET with Retail Sales being the headliner.  This is well before most any mortgage lender updates its rate offerings for the day.  There's never a guarantee that economic data will move the needle.  All we can know is that potential volatility is higher.  The data would have to come in much higher or lower than forecast in order to cause a big move in rates. Even then, Retail Sales and tomorrow's other reports are not in the same league as the mighty jobs report that sent rates screaming higher 2 weeks ago. 

  Mortgage Rate Watch

 2 weeks 3 days ago

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Mortgage Rates Sideways to Slightly Lower
The average mortgage lender is quoting rates that are just a fraction of a hair lower today compared to last Friday.  Lenders were either closed or otherwise not able to update rates yesterday due to the Federal holiday.  Anything other than "higher" is a victory recently.  Rate jumped at the 2nd fastest pace of the year after the jobs report that was released on Friday, October 4th, and continued moving higher through last Wednesday.  They've calmed down since then, but they haven't made any meaningful progress back toward the lower levels seen a few weeks ago. Context matters.  In the short term, it would be easy to lament the fact that rates are up about 0.50% in about a month.  But if we merely look back to early April, rates are still down the better part of 1 percent. In year over year terms, the improvement is about 1.4%.  That's a very solid pace under any circumstances, but especially in the absence of the onset of a recession. Today was uneventful in terms of bond market movement and intraday rate changes from mortgage lenders.  Bigger swings will likely depend on bigger economic reports and there are only a few heavy hitters on the calendar each month. This week's only notable contender is the Retail Sales report on Thursday morning at 8:30am ET.  This doesn't mean rates can't move at all between now and then--simply that Retail Sales has the best chance to inspire bigger movement.

  Mortgage Rate Watch

 2 weeks 4 days ago

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Mortgage Rates Side-Step Into Holiday Weekend
While this week's rates were substantially higher than most of last week's, if we remove a few flashes of volatility,  the average lender stayed very close to Monday morning's levels.  Wednesday afternoon and Thursday mid-day definitely saw multiple negative reprices, but in each case, the bond market recovered enough to limit the volatility.  Compared to last week, it may as well have been a flat line. The following chart shows the mortgage backed securities (MBS) prices that directly dictate mortgage rate movement.  Higher prices = lower rates and vice versa. Today's economic data included a wholesale inflation report that has occasionally caused some volatility, but today's installment was not one of them.  The bond market improved a bit heading into the afternoon and traded calmly from there.  As such, mortgage lenders were not compelled to make any negative mid-day changes after setting this morning's rates very close to yesterday's latest levels.  The next time lenders have a chance to set mortgage rates for the day will be Tuesday due to the market closure on Monday for Indigenous Peoples' Day.  

  Mortgage Rate Watch

 3 weeks 1 day ago

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Here's What's Really Going on With Mortgage Rates This Week
We can appreciate that the daunting task of determining what "the" actual mortgage rate may be at any given moment.  The word "the" is singled out in the previous sentence because there isn't one, perfect, singular, "going rate" for a mortgage.  There's a bell curve with most lenders near the center and a few outliers at the margins.   The only thing that comes close to being a constant across multiple lenders would be the bond market.  Specifically, prices of mortgage-backed securities (MBS) determine the value associated with loans originated by mortgage lenders.  Still, there are numerous variables that lenders control that determine what rates they can offer for any given price level of MBS. Looking at an individual rate quote from an individual lender is one way to know something fairly specific about rates, but of course things can still change for a variety of reasons between the initial quote and the closing table. In order to get a general idea of where mortgage rates are, it's common to turn to a rate index.  In terms of circulation and historical availability, Freddie Mac's weekly rate index is the only game in town.  Unfortunately, in terms of accuracy, on shorter time horizons, it leaves something to be desired--especially for those interested in knowing day to day changes.  Freddie's survey is a 5 day average collected from Thursday through Wednesday and then reported the following day.  When things are moving quickly, that means several inputs to the equation will no longer be relevant.  We've also noticed that Freddie can quite simply undershoot the reality of a big, directional move, like the one we've seen take shape over the past 5 days. There's no telling why this occurs, but it could have something to do with the fact that--even after methodology changes--Freddie's survey still involves human input of rates that aren't necessarily available anymore.

  Mortgage Rate Watch

 3 weeks 2 days ago

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Mortgage Rates Sideways to Higher
Today brought the release of the minutes from the most recent Fed meeting in addition to numerous Fed speeches and the scheduled auction of 10yr Treasuries.  Each of these events has at least some track record of causing volatility for interest rates, but none of them had an impact today. As for the Fed Minutes, it's no surprise to see a lack of response.  The minutes are simply a more detailed account of the meeting that took place 3 weeks ago.  A lot has happened since then--especially last Friday's jobs report. Speeches by various Fed officials also held few surprises for financial markets.  When the shoe had been on the other foot, Fed members commonly reminded the market not to place too much focus on a single month of economic data or a single report.  Granted, the single jobs report also provided upward revisions to the previous reports, but even that's not enough to suggest a change in tack from the Fed--especially when Powell was already clear that the initial 0.50% rate cut is no guarantee that subsequent cuts would be the same size. Despite the absence of inspiration, the bond market drifted into slightly weaker territory.  That normally connotes higher mortgage rates, but due to the timing of intraday volatility, many lenders are right in line with yesterday's levels.  Lenders who offered mid-day improvements yesterday are a bit higher today.  Those who held the same rates all day yesterday are actually a hair lower on average.

  Mortgage Rate Watch

 3 weeks 3 days ago

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Mortgage Rates Finally Level Off After Quickest Spike in Months
Mortgage rates spiked at their fastest pace in months on Friday following the jobs report and yesterday added insult to injury, making for a total increase of nearly 3/8ths of a percent (.375%) in the average lender's top tier conventional 30yr fixed rate.   Moves of this size are rare, but less so when the market gets a big piece of surprising information after recently hitting a longer term high/low.  Those ingredients were in place this time around with prevailing rates close to the lowest levels in well over a year over the past few weeks and a shockingly strong jobs report.  The last similar example was in April of this year.  Instead of jobs data, it was an inflation report that did the damage back then, but there's still a lesson to be gleaned.  Simply put, it wasn't until the market received the next top tier economic report that rates began to move in the other direction.   In other words, while the worse may be over in terms of the rapid, upward movement, it will take new data to put compelling downward pressure on rates. Back in April the bond market was a bit more focused on inflation than jobs, but both were considered top tier reports.  At present, the market is much more focused on jobs, but inflation data could still have a moderate impact if it comes in far enough from forecasts.  The next CPI (consumer price index--the biggest market mover among inflation reports) comes in on Thursday morning.  

  Mortgage Rate Watch

 3 weeks 4 days ago

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Highest Mortgage Rates in 2 Months
It's been a strange and frustrating couple of weeks for anyone who mistakenly believed that mortgage rates would move lower after the Fed rate cut.  To be sure, there is plenty of that sentiment out there according to the just released Fannie Mae sentiment survey showing the highest net percentage of respondents who thought rates would go down since the survey began in 2021. To be fair, the survey asks about a 12 month time frame and a lot can happen in 12 months.  As for the 3 weeks since the Fed rate cut, however, things have not been great.  Today's rate movement added insult to Friday's injury with the market still working through the momentum created by Friday's stronger jobs report. Given the motivations for the rate spike and the available economic data, it's unlikely that rates will move quickly back down to the levels seen in mid September.  They'd need a lot of downbeat economic data to do so.  Even then, traders would still be waiting to see what the next jobs report had to say before getting too carried away. Meanwhile, there's some risk of additional weakness in rates if the economic data is more resilient than expected.  The average lender is already back up to levels last seen in early August. Bottom line, markets got locked into the belief that data would slowly deteriorate (with a lot of weight being given to the last few jobs reports) only to see the most recent jobs report say "not so fast!"  There's a bit of a re-set happening at the moment.  We can't know exactly how big it will be until we get through more econ data.  Unfortunately, this week is much lighter than last week in that regard.  

  Mortgage Rate Watch

 3 weeks 5 days ago

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Massive Jump in Mortgage Rates After Jobs Report
Today's much-anticipated jobs report ended up coming out much stronger than expected.  A stronger result was all but guaranteed to cause carnage (relative) in the mortgage market and that's definitely what we're seeing.  A caveat is that rates are still much lower than they were several months ago, but the average lender is now back in line with mid August levels.  Additionally, this is one of the largest single day jumps we've seen with the average 30yr fixed rate moving from 6.26 to  6.53.  A move of more than 0.25% in a single day is tremendously uncommon, but it can happen due to the underlying structure of the mortgage bond market.  For those who would like to nerd out on those details, here you go: Whether a mortgage lender is lending their own stockpiles of cash or temporary cash obtained from a credit line, the chunk of cash wired to escrow at closing carries a cost.  For a majority of mortgage lenders, the day to day changes in those costs are determined by the trading of mortgage-backed securities (MBS). MBS are similar to bonds like Treasuries in that investors pay a lump sum of cash and earn interest over time.  They're different in several key ways.  The most important difference is that the “borrower” of US Treasuries (i.e. the US Government) cannot return principal to the investor and end the deal.  It must continue to pay for as long as it agreed. Mortgage borrowers, on the other hand, can sell/refi/etc and end the mortgage that underlies the mortgage-backed security.  This introduces an element of uncertainty for investors that will be important in a moment.

  Mortgage Rate Watch

 4 weeks 2 days ago

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Consistently Higher Rates Since Fed Rate Cut, But Friday Could be BIG
Depending on how tuned in you've been to changes in our daily rate tracking, the news may be getting old at this point.  Rates have done almost nothing but move higher ever since the Fed cut rates on September 18th. While this continues to be a challenge for some folks to comprehend, it was always a risk, which is why we spent several weeks warning about the possibility leading up to Fed Day.  Thankfully, the increases have been small in the bigger picture.  Today was just another day in that regard, although it was one of the bigger bumps in the road if we look at today's highest rates versus yesterday's lowest (Wednesday saw higher rates in the morning and lower rates in the afternoon.  Thursday was the opposite pattern).  Lenders increasingly increased rates throughout the day after an important economic report (ISM Services) showed much stronger than expected growth.  As important as ISM data is, it's nothing compared to Friday's forthcoming jobs report.  No other piece of scheduled economic data has as much power to cause volatility for rates. At this point the market has done a fairly good job of processing any remorse it might have had about getting too excited for Fed day and/or any anxiety that has been building about the econ data not being weak enough to justify a fast rate cut pace.  This leaves Friday's data in a good position to either help or hurt in a fairly big way.  The size of the reaction is generally proportional to size of the "beat" (job creation higher than expected) or "miss" (the opposite). There's no way to know which one we're going to get ahead of time.  Occasionally, the data leads the bond market to "thread the needle" with rates ending up not far from where they started.  

  Mortgage Rate Watch

 4 weeks 2 days ago

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Mortgage Rates Near 1-Month Highs, But That's Still Pretty Great
Mortgage rates moved higher today after an employment report suggested that Friday's forthcoming Employment Situation (the BIG jobs report) might come in slightly better than expected.  The report in question, ADP Employment, is always released 2 days before the big jobs report and it's designed to align with the key headline of that report: nonfarm payrolls.   ADP's payroll count was only slightly higher than the market expected today, but that was enough for traders to sell bonds, thus pushing yields/rates higher.  Thankfully, mortgage-specific bonds performed better than the rest of the bond market, thus limiting the upward movement in mortgage rates.  Nonetheless, the average lender is back up to the highest levels since September 9th. While that is getting pretty close to a full 30 days, mortgage rates are still a far cry from the levels seen during the first few days of September.  Moreover, there hasn't been a ton of movement after the 9th, so it didn't take much of an increase to get us back to those levels.  The average lender has been in a narrow range of about 0.125% the entire time. All that having been said, the reaction to today's ADP report suggests the market is very willing to have a big reaction to Friday's jobs report.  It's very true and very important to understand that there's no way to know how the jobs report will come out until it is actually released.  The market has already adjusted to everything that can be known about the future.  All we know is that volatility potential is elevated significantly heading into the end of the week. 

  Mortgage Rate Watch

 1 month ago

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Mortgage Rates Begin The Month With a Modest Victory
While the past 5 months have been well-stocked with victories for mortgage rates, the past week and a half brought a bit of a pull back.  Most of that upward momentum can be chalked up to rates rushing to get into position for the Fed's rate cut on September 18th.  It's actually quite a bit more complicated than that, but thankfully, the movement has been small enough that it doesn't demand a detailed explanation. In not so many words, the entire bond market had some "refiguring" to do after Fed day, and that process was pretty good for the shortest-term rates and mildly inconvenient for longer-term rates like mortgages. While there was some uncertainty at times, last week now looks like it clearly marked the end of the reaction phase to the Fed's policy shift.  That leaves the rate market to move on to watching the normal stuff: scheduled economic data and unscheduled surprises that are big enough to impact global financial markets.  Both came into play today. Interestingly enough, today's economic data didn't have a big impact on rates.  Instead, the market focused on headlines regarding missile strikes in the Middle East.  In general, escalating military conflict (if sufficiently alarming) tends to push stock prices and interest rates lower, as was the case this morning.   Mortgage rates fell back to last  Friday's levels after yesterday saw the highest rates in several weeks. 

  Mortgage Rate Watch

 1 month ago

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Mortgage Rates Moderately Higher to Begin The Week
Mortgage rates have generally been moving higher since the Fed cut rates 2 weeks ago.  We've discussed and explained that paradox exhaustively and can now move back to tracking the normal array of cause and effect in the rate market. The first day of the new week kept the trend of steady rate increases alive. Technically, these are the highest rates since September 9th, but it's important to remember that there's been very little change in the bigger picture.  Apart from the past few weeks, today's rates would still be the lowest in more than a year. While today's weakness can't be reduced to a single factor, the primary motivation was a speech from Fed Chair Powell in which he reminded the market that the Fed was not in a hurry to cut rates.  The message wasn't that different from the press conference that followed the Fed rate cut 2 weeks ago, but some market participants were perhaps hoping to see a softer side of Powell.  From here, the schedule of economic data brings distinct opportunities for volatility in rates every day for the rest of the week.  Friday is the most highly consequential due to the jobs report release at 8:30am ET.

  Mortgage Rate Watch

 1 month ago

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Refi Booms, Loan Limits, and Mortgage Rate Misdirection
'Tis the season for things to be something other than what they appear to be, apparently. Lenders are talking about new loan limits, but they haven't officially changed. News stories are saying rates went lower this week, but they're higher. And there's even talk of a big refi boom, but as you may have guessed, that's also not exactly right. Rates . Rates continued to move slightly higher (yes, higher), while remaining close enough to long-term lows.  This chart of 10yr Treasury yields (a proxy for longer-term rates like mortgages) does a good job of capturing all of the positive momentum seen in recent months as well as the mild correction that began after last week's Fed rate cut. Things look even milder if we focus on mortgage rates.  In fact, one measure of mortgage rates (Freddie Mac's weekly survey) is so mild that it actually went LOWER this week.  Sadly, Freddie's numbers don't align with reality this week.  We are normally able to use the objective daily numbers from MND to reconcile such discrepancies, but it's not possible in this case.  If you want a deeper dive on this phenomenon, here you go: Mortgage Rates are 100% NOT Lower This Week. Loan Limits and Home Prices Other misdirection plays are much easier to explain.  For instance, you may see some lenders advertising new conforming loan limits that are near, or over $800k.  Official conforming loan limits are announced at the very end of November.  So who's lying?

  Mortgage Rate Watch

 1 month ago

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