Mortgage Rate Watch
Why Have "Points" Made a Big Resurgence In The Mortgage Market?

The most important ingredient in the mortgage market is the presence of homeowners--prospective or otherwise--with the means and desire to make monthly payments.  That fact invites investors to earn solid, predictable returns with almost no risk.  After all, most of the mortgage market is comprised of loans that guarantee that an investor will get their principal and interest back.  The only real risk is a temporary interruption in cash flow or a premature sale/refi that results in the investor being unable to collect interest for as long as they'd hoped.  completely unavailable tomorrow.  

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Mortgage Market is Freaking People Out

There are too many counter-intuitive and frustrating developments in the mortgage market to comprehend all at one time, let alone discuss.  That's not a cop-out as much as it is a favor I'm doing for you.  If we tried to cover all of the nonsensical ground right here, this would become yet another wall of text in this era where they're all too common.  So I'll try to make this pithy and interesting.

The bottom line is that mortgage rates are all over the place, depending on the lender and the loan program.  Lender rates on the same program are farther apart than they've ever been.  Day-to-day and intraday movements are huge and seemingly random.  Whereas mortgage rates typically take a vast majority of their guidance from the trading levels in the mortgage bond market (95%+), the correlation is less than 50% right now.  On many mornings (like today), mortgage bonds say rates should be lower, yet they were unequivocally higher for most lenders.

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Mortgage Rates Are Amazing and Terrible

Depending on what you're looking at, when you look, and where you look, mortgage rates could either be amazing or terrible.  Large, upstanding, secure, solvent, excellent lenders are as much as a full percentage point apart from one another on the same loan quote.  That essentially NEVER happens in the mortgage market--not with all of those qualifiers anyway. 

This is a symptom of the "mess" that coronavirus has made of the financial market.  For those that want to pretend there's some unique mortgage-specific issue that makes things more difficult for the mortgage market versus other sectors, look around you.  To whatever extent it's been "inconvenient" for the average 401k to lose more than 20% of its value in 3-4 weeks, the mortgage market has faced "inconveniences" on a similar scale.  Compared to airlines, oil, retail, food service, and a laundry list of other sectors hit hard by COVID, the mortgage industry merely gets a participation trophy in this race to terrible.

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Mortgage Market is Still a Mess, But a Hopeful One

There is a LOT of misinformation flying around out there about the mortgage market, the Fed, and the various impacts on rates from the government's coronavirus response.  If you're in the market for big-picture overviews of all the relevant considerations with links to excruciating levels of technical detail, check out this compendium of the Fed's current mortgage bond buying efforts. If you're just here to find out what the heck is going on with mortgage rates, read on.

Rates are legitimately all over the place in a way we haven't seen, ever.  I'm including a significant amount of personal experience analyzing the financial crisis and more than a careless amount of research into historically similar levels of volatility as seen in April 1987.  March 2020 wins, period.  The sudden, unexpected, massive economic shift associated with the most serious global pandemic of our lifetimes is a big deal.  Could we say that the Spanish Flu or Great Depression were bigger deals?  Sure, maybe.  But those events happened in a different world.  In fact, the rise of the internet and rampant globalization of the economy in the 90's arguably makes even 1987 a poor comparison (and yes, I know there technically was internet back then, but were you able to liquidate your 401k from your cell phone's mobile app after reading a coronavirus headline in the bathroom in 1987?  Like I said... different world).

 

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The MOST Volatile Day For Mortgages

Today was the most volatile day in the history of the mortgage market in many regards.  There were days in the early 80's that saw rates move by similar amounts, but none of them saw the underlying market for mortgage bonds move back and forth by such gigantic amounts.  What does this mean for you and your ability to buy or refi at the rates you may have heard about recently?

That depends on the rates you've heard about recently!  Many borrowers mistakenly believe the Fed's recent rate cuts mean that mortgage rates have fallen by an equal amount.  In fact, many loan originators report getting calls about 0% rates.  Unequivocally, there are no 0% mortgage rates!  If you're not 100% sure about why that's the case, please read this article.

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