Mortgage Rate Watch
Just yesterday, we were nodding in agreement and acceptance of the fact that rates were better served by cooling off a bit (read: "rising") after improving at a pace that seemed too quick for the motivations earlier in the week. In other words, it was a bit of a pickle to explain why Tuesday and Wednesday's news and data were worth a surge to 3-month lows. Now today, we're right back in the same pickle, but everyone who's cool knows that pickles are delicious. Today's is no exception with the average lender easily moving down to new 3-month lows. As for motivations, today actually wasn't quite as pickled as Wednesday. We had the week's most anticipated economic report and the most anticipated Fed speech. ISM Manufacturing only came in a bit weaker than expected (good for rates), but perhaps more importantly, it didn't come in higher than expected. Thus, the bond/rate market wasn't forced to quickly change its strategy of adjusting for a new, lower rate outlook for 2024. Same story with Fed Chair Powell's mid-day speech. Knowing what we know about Powell, it wasn't too likely that he'd take a strong stand in one direction or the other (which is exactly right given the "data dependent" nature of the Fed's rate considerations), but some saw a risk that he would intentionally try to nudge rates higher due to the speed with which they've recently fallen. Powell definitely didn't convey any such agenda today and bonds/rates were invigorated as a result. Traders moved to defend against the possibility that next week's data continues arguing for lower rates. We say "defend" because if the data is accordingly weak, the current level of rates is far too high.
Friday, December 1, 2023 10:05:00 PM UTC
If you count the Friday after Thanksgiving as a business day, mortgage rates had fallen for 6 straight days as of yesterday afternoon. Moreover, they'd reached the lowest levels in 3 months and had put an impressive amount of distance between themselves and the highs seen just over a month ago. Ironically, yesterday's analysis expressed some measure of bewilderment at just how much better rates were versus the previous day. Now today, we see that all good things--especially those that look a little TOO good--come to an end. This isn't necessarily a bad thing. When rate rallies continue unabated, the certainty and swiftness of the eventual rebound only increase. By undergoing a moderate rebound in a measured, logical way, rates have made it easier for themselves to remain in the current range without excess volatility. That doesn't mean volatility is out of the question, but it's more likely to be seen in response to the big ticket economic data that typically inspires bigger swings in rates. We won't get most of that big ticket data until next week, but there is a chance that tomorrow morning's ISM Manufacturing index will spark a reaction if it's much higher or lower than expected. As is always the case, there's no way to know if the data will be good or bad for rates ahead of time. All we know is that the rate market is incredibly interested in the upcoming data as an indication of whether rates have officially turned a corner in the big picture. While that's exciting (or scary), keep in mind that it would take several months of cohesive data to do the trick.
Thursday, November 30, 2023 8:08:00 PM UTC
There were no major economic reports or news headlines in play today. Movement in the bond market (which underlies mortgage rate changes) was orderly and moderate. There were no major changes in high level lending costs or any other costs that would impact mortgage rates. Despite all that, rates improved appreciably compared to recent days, ultimately hitting the best levels in almost exactly 3 months. For some context, those levels from 3 months ago were very close to multi-decade highs at the time. After that, rates simply added insult to injury through the end of October. November, on the other hand, has moved reasonably quickly to push top tier 30yr fixed rates back into the high 6% range. Officially, we're not there yet. The average lender is still in the low 7% range, but that is a huge improvement from several weeks ago. If tomorrow were to turn out as good as today, the index would break below 7%. Whether or not tomorrow is as good as today is completely unknowable. Actually, perhaps it's somewhat knowable. We can say that, all other things being equal, it is tremendously uncommon for two successive days to be as good as today. It does happen, but typically only with obvious motivations. The bigger questions, risks, and opportunities remain in the week ahead when we'll have multiple opportunities to see obvious motivations among several highly consequential economic reports.
Wednesday, November 29, 2023 10:03:00 PM UTC
The trend in rates has been very linear in the 2nd half of the month and the day-to-day changes have been getting smaller and smaller. On 5 of the last 6 business days, the average 30yr fixed rate has moved by less than 0.02% by the end of the day. Conveniently, most of the gentle moves have been in a friendly direction. With rates already at 2 month lows last week, the result is gentle descent to slightly lower 2 month lows. Today's improvement followed the bond market's reaction to comments from the Fed's Chris Waller who said that the Fed could cut rates if inflation continued to decline for several months. Waller also reiterated and amplified his previous comments on the slower pace of economic growth. Specifically, last month Waller said that we'd either need to see slower growth or face a resurgence of inflation. Today's comments hearkened back, saying "something appears to be giving, and it's the pace of the economy." There are no extremely high profile economic reports on tap this week, so the market is perhaps more willing to react to guidance from Fed speakers. It continues to be the case that next week's economic data can have a much larger impact--especially Friday's jobs report. [thirtyyearmortgagerates]
Tuesday, November 28, 2023 8:52:00 PM UTC
Thanksgiving week is always an interesting (and frequently frustrating) time for the bond market that underlies day to day interest rate changes. Markets are traded by humans, even in cases where humans are programing machines to do the trading, and human participation dwindles on certain holiday weeks. As participation decreases, trading levels can jump around in a more random way as fewer people and fewer dollars constitute a larger percentage of the overall trading environment. That can lead to volatility in mortgage rates as was the case on Friday for lenders that actually updated rates from Wednesday. In other words, the bond market pointed to a moderate jump in rates on Friday. There was a good chance the jump was an artificial byproduct of Thanksgiving week, but there was no way to be sure until today. Now we're sure. Bonds quickly moved back in line with Wednesday's levels and the average mortgage lender did the same. That's good news considering last Wednesday's mortgage rates were right in line with the lowest levels of the past 2 months.
Monday, November 27, 2023 8:23:00 PM UTC