Mortgage rates were effectively unchanged on Thursday with the average lender very close to the best levels in over a year. But when it comes to the underlying bond market and the rates available to consumers, there are some dislocations that suggest risk is increasing. Specifically, bonds lost ground today. This normally implies higher mortgage rates. But the timing and magnitude of bond market losses can dictate the size of mortgage rate changes as well as the timing. In today's case, bonds were in better shape this morning when mortgage lenders published their daily rate offerings.  There was additional bond market weakness as the day progressed, but not enough to trigger a mid-day rate change from lenders (mortgage lenders prefer to avoid mid-day changes unless bonds make bigger moves). Bottom line: instead of going into tomorrow with a cushion from the bond market, mortgage lenders will have to raise rates a bit in order to catch up.  NOTE: this assumes that bonds hold their exact same levels through tomorrow morning.  That's certainly NOT a guarantee considering we'll get the release of September's CPI inflation data at 8:30am ET.  There's no way to know how CPI will come in. Markets have already positioned for everything they think they know about the data.  In other words, there is a consensus expectation that monthly core CPI will be 0.3% and non-core (headline) CPI will be 0.4%. If the actual numbers are higher, rates would be more likely to rise tomorrow, but if they're lower, bonds could bounce back enough that mortgage rates continue to hold steady, or actually improve. 

Mortgage rates were perfectly unchanged today, on average.  With that, they remain in line with the lowest levels in more than a year and very close to the lowest levels in more than 3 years.  Recent momentum has been moderate and favorable. In the absence of big economic reports that are on hold due to the shutdown, bonds have taken cues from other developments like the new tariffs announced 2 weeks ago and the regional bank drama seen last week.  These market movers would normally be operating in the background--perhaps not even meriting discussion--but the dearth of data and the generally narrow range makes their effects more noticeable.  In thinking about the relatively uneventful return to long-term lows, it's good to remember that momentum comes and goes when it comes to rates and the bond market that drives them.  Sometimes, a string of good luck is the only required catalyst for a token pull-back.  Bonds are showing some fatigue as 10yr yields have pushed just under 4.0%. It may take some more convincing in the form of data or other events to motivate additional improvement. 

The bonds that underly mortgage rates were only slightly stronger today, but that's never a bad thing when they closed near the best levels in a year the previous day. Additionally, those bonds improved by the end of the day yesterday, meaning that mortgage lenders were going into today with a bit of a cushion. When lenders set rates, they are basically looking at a constantly-moving bond market and locking in rates that will be in effect for the rest of the day.  Mid-day changes only happen if bonds make a big enough move and yesterday's wasn't big enough for most lenders. Yesterday's cushion combined with today's modest additional improvement for fairly decent drop in the average top tier 30yr fixed rate.  We're also now in the zone of rates where movement happens more quickly due to the underlying architecture of the mortgage bond market.  In not so many words, this causes rates to accelerate toward levels that end in 0.125 or .625 for reasons that are too esoteric to dig into today (if you want to nerd out, here you go: Why Mortgage Rates Move in Jumps Instead of Straight Lines). Some lenders are offering their lowest rates in over a year, and some in over 3 years.  The average lender is right in line with 1-year lows and close enough to 3-year lows.

Mortgage rates ended last week at the lowest levels in just over a month. It was the 3rd best day in over a year and the 24th best day in over 3 years. The other 23 days weren't too much lower either. The only difference today is a microscopic improvement that makes it the 2nd best day in over a year. In other words, we're hanging out near 3 year lows with minimal volatility. In order to see sharper, more sustained momentum, we'd likely need the government shutdown to end. That would allow the most consequential economic reports (like the jobs report) to be released. It would also allow data collection to resume for future jobs reports. Between now and then, there is other data to guide the rate market, but it's just not as heavy hitting. This week is particularly light in that regard, but there's one exception. The BLS received an exception to compile September's CPI inflation data, to be released this Friday. It's not quite on par with the jobs report, but it can certainly get rates moving (for better or worse, depending on the details).

The average top tier 30yr fixed rate was unchanged on Friday despite the bond market being slightly weaker. Normally, weaker bonds mean higher rates, but the timing of intraday market movement matters. In today's case, bonds are still much stronger than the first half of yesterday, and only weaker when compared to closing levels. Because mortgage lenders prefer to set rates once per day (only adjusting after a certain threshold of market volatility), the average lender hadn't yet fully adjusted to yesterday afternoon's bond market gains. In plainer terms, mortgage lenders had a bit of a cushion today and it was perfectly soaked up by the modest losses in the bond market. By remaining unchanged, the average rate is officially in line with the lowest levels in just over a month. Apart from that, there are only a handful of days with lower rates going all the way back to late 2022.