Author: Editor - Finance Top Stories

Mortgage Rates Higher Despite Friendly Market Movement

Mortgage rates are largely dictated by movements in bond markets–specifically mortgage-backed securities (MBS).  When bonds improve, prices rise and investors are willing to pay more to buy loans.  This results in rates moving lower.  In other words, bond market improvement = lower rates. With all of that in mind, today is a bit of a paradox as the average lender is quoting slightly higher rates today, despite general improvements in bond markets.  Nothing too terribly mysterious is at work here though.  The inconsistency has more to do with the timing of Friday’s market movements and the generally narrow range over the past four days.  Specifically, bonds weakened progressively into Friday afternoon and most lenders never fully adjusted rate sheets to account for that weakness.   This left the average lender at a disadvantage to begin the new week and today’s gains in bond markets weren’t enough to offset it. The most prevalently-quoted conventional 30yr fixed rates remain in a range from 4.0%-4.125% on top tier scenarios.  Most clients will not see any change in the “rate” side of the equation compared to Friday, thus implying moderately higher upfront costs.   Loan Originator Perspectives Bond markets slumbered today, posting small gains in early PM trading. There’s scant data on tap for this week, but Thursday has the potential for drama as both the ECB and BOJ will make policy announcements. Looks...

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Mortgage Rates End Week at Best Levels

Mortgage rates are experiencing increased volatility at the end of this week, which was to-be-expected given the calendar of events and economic data.  Fortunately, the volatility worked in favor of lower rates this morning after Retail Sales and a key consumer inflation report both came in lower than expected.  In general, weaker economic data coincides with rates moving lower.  Investors are particularly interested in inflation data at the moment as it seems to be the Fed’s biggest hang-up when it comes to removing “accommodation” (a broad term that refers to the level of the Fed Funds Rate and the Fed’s bond buying policies).   A removal of accommodation could take the form of a Fed rate hike or a decrease in the amount of bonds the Fed is currently buying as a part of its reinvestment policy.  The Fed has increasingly signaled that it will soon announce such a reduction, and they’ve already laid out the framework to do so.  Lackluster inflation data means the Fed is less likely to flip the switch on those plans in an upcoming meeting.  And the longer it looks like the Fed will continue buying the amount of bonds it’s currently buying, the better rates will do, all other things being equal.   All other things got less and less equal as the day continued.  The morning’s rate sheets were the best of the...

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Mortgage Rates Give Back Some of Yesterday’s Gains

Mortgage rates had their first great day in several weeks yesterday, but ended up giving back some of those gains today.  Bond markets that underlie interest rates took their cues from central bank statements.  In Europe, unnamed officials suggested the European Central Bank (ECB) would announce a plan to decrease its bond buying in September.  Because central bank bond buying puts downward pressure on rates, this sort of news puts upward pressure on rates! Granted, we’re talking about limited comments from the other side of the world.  As such, the impact on mortgage rates in the US is limited, but there was impact nonetheless.  Bond markets also took some damage from Fed Chair Yellen’s 2nd day testifying before congress.  This time around, she showed a bit more conviction on the topic of removing accommodation.  In plainer English, “removal of accommodation” generally means two things: raising short-term rates and buying fewer bonds–neither of which are good for interest rates today.   All that having been said, the input from central bankers amounted to a very small adjustment in the bigger picture.  Most borrowers will continue to see the same rates as yesterday, but with slightly higher costs upfront. From a strategy standpoint, today’s bond market weakness reminds those inclined to float their rate that risks clearly remain, both at home and abroad.  Tomorrow’s biggest risk is economic data in the form...

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Mortgage Rates at 2-Week Lows After Yellen

Mortgage rates had been holding in a narrow range near their highest levels in roughly 3 months over the past few days.  Despite some stability in underlying bond markets, lenders had hesitated to make meaningful adjustments to rate sheets (in their defense, there wasn’t much to work with).  That all changed today after Fed Chair Yellen’s congressional testimony. In fact, it was the prepared remarks for the testimony, released at 8:30am ET this morning that did the trick for bond markets (which underlie interest rate movement).  Market participants were eager to see if Yellen would strike a similarly soft tone to some of the recent speeches from other members of the Fed.  Indeed, that was the case as Yellen said the Fed doesn’t need to hike much more in order to reach a neutral Fed Funds Rate.   Although the Fed Funds Rate doesn’t directly affect 30yr-fixed mortgage rates, the latter tend to respond to changes in the Fed’s rate hike outlook.  In other words, if investors see the Fed as being less likely to hike in the future, longer-term interest rates can fall in the present.  That’s essentially what happened today.   The improvements are big enough to entice risk-averse borrowers to lock in the gains.  From a momentum perspective, more risk-tolerant borrowers might feel a bit more optimistic about interest rates generally finding a ceiling at recent highs,...

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Glimmer of Hope in Rate Stability, But It Could Be a Trap

Mortgage rates remained in a very narrow range near their highest levels in roughly 3 months today.  If you’re into splitting hairs, we could discuss the fact that the average lender is charging microscopically lower closing costs for the same rates quoted yesterday, but most borrowers won’t even see a change in rate quotes.   The sideways momentum isn’t all too surprising given that the week’s biggest potential market movers are all coming out over the next 3 days.  The past 2 days, then, have been a nice reprieve from the consistently higher rates seen since June 27th.  But undertand the reprieve is not necessarily an indication of a reversal.   Even if the coming days end up helping rates, there are lingering risks regarding the European Central Bank (ECB) policy announcement on July 20th.  It’s unlikely that rates will be willing to embark on a significant move lower unless that ECB announcement is pleasantly surprising, and there’s just as much chance of Unpleasantness. Bottom line: risk-takers have seen a glimmer of hope in the recent stability, but for most borrowers, it’s still a good idea to err on the side of caution. Loan Originator Perspective Headlines are helping bonds extend yesterday’s gains.   As of about 1pm, i have only seen 1 lender issue a reprice for the better.   If you plan to lock today, it would be...

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