Mortgage Rate Watch
Mortgage Rates Hold Steady at 3-Week Lows

Mortgage rates stayed steady at the lowest levels in more than 3 weeks as financial markets are still accounting for additional risks relating to Turkey.  Simply put, Turkey is in the midst of a debt/currency/banking crisis and investors are worried about some sort of domino effect among banks that are heavily invested in Turkish banks.  All this is worth a bit of "safe-haven" demand for US Treasuries, which offer essentially risk-free returns and a liquid place to park money temporarily.

When investors buy more bonds--all other things being equal--it causes bond prices to rise.  When bond prices rise, investors are technically willing to accept lower interest payments, and it's that part of the equation that speaks to lower interest rates on US Treasuries and mortgage rates.

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Mortgage Rates Noticeably Lower on Global Market Drama

Mortgage rates, and indeed most interest rates, are tied to movement in the bond market.  In turn, bonds tend to benefit when big, scary stuff is shaking global economic confidence.  In today's case, the debt crisis in Turkey did just that.  Investors sought safe haven in bonds, and rates moved to the lowest levels since July 20th.

Lest you think that Turkey is a constant arrow in the quiver of potential market movers for rates, understand that things have had to get pretty bad for US markets to unequivocally respond.  This has been a festering for several days (even months, depending upon how nervous or clairvoyant you might be by nature).  Today was really the first day that where there's no doubt that Turkey is in the drivers' seat for global financial markets.

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Lowest Mortgage Rates in Several Weeks

Mortgage rates finally did what they were supposed to do today.  Specifically, they fell in response to bond market improvement.  That's the way it should be, but over the past two days the typical relationship between bonds and mortgage lenders' rates has been a bit inconsistent due to the timing of market movement throughout the day.

On Tuesday, bonds weakened throughout the day.  This would normally coincide with rates moving higher, but the bond market weakness didn't happen quickly enough for most lenders to take action.  As such, they were left to make the adjustment the following morning.  Then on Wednesday, bonds improved, but not quickly enough for most lenders to bring rates lower.  That left us with a bit of an advantage to start the day today. 

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Mortgage Rates Edge Higher Despite Market Improvement

Mortgage rates were modestly higher today.  Much like yesterday, there's a catch!  Yesterday's catch was that underlying bond markets had weakened enough during the day that today's rates were more likely start out higher.  That was indeed the case.  Therefore, today's "opposite" catch is that bond markets strengthened enough during the day that it implies slightly lower rates tomorrow morning, all things being equal.

In other words, bond markets didn't improve quite quickly enough for most lenders to adjust mortgage rate sheets in the middle of the day today, but they did improve enough for rates to be just a bit better if nothing changes between now and tomorrow morning.   

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Mortgage Rates Mostly Steady Today, But There's a Catch

Mortgage rates were roughly unchanged today.  That would make this the 4th day in a row without any move higher in rates, and it would leave us at the lowest levels in roughly 2 weeks. 

But there's a catch.

The catch has to do with the way that mortgage lenders change their rate sheets based on movement in underlying bond markets.  Bond trading levels have a direct bearing on mortgage rates, but lenders can't very well change rates every few seconds when a new trade flashes in bonds.  Rather, lenders have certain thresholds of strength or weakness in mind.  As soon as bonds cross one of those thresholds, lenders will begin "repricing" for the better or worse.

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