Mortgage Rate Watch
Mortgage Rates Rocked (Relatively) By Tax Plan Optimism

Mortgage rates moved higher today as financial markets grew more optimistic about the potential for tax reform.  Late last night, the Senate passed a resolution that included language designed to make tax reform legislation easier to pass.  In a nutshell, it means the Senate only needs 51 votes as opposed to 60 when it comes time to consider a tax bill.

Stocks like tax reform.  They moved quickly higher in futures trading.  Bonds (which dictate rates) aren't too thrilled with the idea for several reasons.  They moved quickly lower in price, which equates to upward movement in terms of rates.

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Mortgage Rates Hold Ground Amid Market Volatility

Mortgage rates were unchanged to slightly lower today.  Political drama in Europe pushed stocks lower overnight and sent investors toward safer haven assets like bonds.  Higher demand for bonds pushes rates lower, all things being equal.  

All of the above meant a stronger start for bond markets and slightly lower mortgage rates this morning.  Still, the average improvement was so small that it was barely noticeable, largely because bonds had weakened yesterday afternoon, implying that lenders would have started today at a disadvantage were it not for the overnight improvement.  Still with me there?  In a nutshell, bond market weakness yesterday never made it onto lender rate sheets and this morning's bond market strength was just barely enough to counteract that weakness.

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Mortgage Rates Rise Only Modestly Despite Market Weakness

Mortgage rates moved modestly higher today despite bigger movement in underlying bond markets.  In part, this is a byproduct of the way rates behaved at the end of last week, when lenders didn't adjust rates lower as quickly as bond market strength would have suggested.  In short, rates are playing it closer to the vest while the bonds that underlie and inform rate movement have been a bit more volatile.  

Bonds and rates frequently react to economic reports and other news that speaks to the health of the economy or the rate-setting policies of the Federal Reserve.  Although we did have a key report on new home construction and several speakers from the Fed today, rates were preoccupied with less overt motivations.  One example would be bond traders who decided to sell bonds today simply because trading levels hit certain targets. 

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Mortgage Rates Rise a Bit More From Recent Lows

Mortgage rates were at their best levels in roughly a month last Friday afternoon.  Since then, they've risen modestly on each of the past two business days.  As has been the case for quite some time, day-to-day movement continues to be very tame.  The actual interest rates at the top of loan quotes rarely change from one day to the next.  Instead, fine-tuning adjustments to the overall cost of financing come courtesy of slightly higher upfront costs--at least in today's case.

In other words, if you were being quoted 3.875% yesterday on a 30yr loan yesterday, chances are you'd be seeing the same rate today, but with upfront costs just a bit higher (or a lender credit that's just a bit lower, depending on the scenario). 

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Mortgage Rates Sideways to Slightly Higher

Mortgage rates were sideways to slightly higher today, depending on the lender.  Underlying bond markets suggested a bit more movement, and that will likely be reflected in tomorrow morning's rate sheets unless bonds improve overnight.

In other words, effective rates are just a bit lower this afternoon than bond market trading levels would imply.  This happens fairly often when bonds move during the day, but not by a wide enough margin to prompt mortgage lenders to reissue the day's rate sheets. 

All that having been said, the change would still be fairly minimal in the bigger picture, with most any lender continuing to quote the same interest rate (just with slightly higher upfront costs).  After dropping at the best pace in more than a month to the lowest levels in roughly a month on Friday, this modest pullback isn't yet cause for concern, but that could change if the weakness continues tomorrow.

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