Mortgage Rate Watch
Mortgage Rates Move Lower After 2-Day Rout, But Underwhelmingly So
Wednesday was one of the worst days in decades in terms of single-day upward movement in mortgage rates.  Thursday added a bit more insult to the injury.  The resulting levels were the highest since November 2023.  We should be thankful, then, that Friday managed to push back in the other direction, but it would be easier to be a lot more thankful if the improvement was a bit more robust. Of course, things could have been worse.  We could have continued to even higher rates, so the lamentation here is a being intentionally dramatized a bit.  Nonetheless, it's a worth noting that the average lender is still basically right in line with the levels that broke our hearts on Wednesday afternoon. The optimists out there can cheer the fact that we mostly erased Thursday's additional bump.  The rest of us will continue aspiring to live with such a glass-half-full mentality. As for the nuts and bolts, the bond market improved overnight and then slowly deteriorated for most of the domestic trading session.  The movement wasn't big enough for most mortgage lenders to change rate sheets over the course of the day.  Instead, they set rates fairly conservatively in the morning (if they hadn't, we likely would have seen some upward adjustments in the afternoon). The average lender is still in the 7.25-7.375% range for a top tier conventional 30yr fixed, but it's easier to quote 7.125% today with some additional upfront cost.
Mortgage Rates Are Actually The Highest Since Mid November
Wednesday's Consumer Price Index caused a brutally fast spike in mortgage rates.  It wasn't notable for taking us to exceptionally high levels (October 2023 was much higher), but it was one of the biggest single-day jumps.  Either way, it easily took the average lender back to highest levels since November 2023.  Today was very tame by comparison although rates moved just a bit higher.  The average lender is at the weakest levels since November 20th, 2023.  This reality is at odds with many of today's mortgage rate headlines which mention 6.88% as this week's rate.  So what's the true story? 6.88% is a product of Freddie Mac's weekly survey.  What Freddie really means is that 6.88% was the 5 day average from last Thursday through yesterday. Moreover, Freddie's survey doesn't adjust for upfront discount points and several other loan features that can push rates down.  Combined with the averaging methodology and lag, Freddie's rate is frequently misleading for consumers who are trying to get a sense of where rates may be on any given day. Please be very well assured and very certain that 6.88% is not today's rate.  While a mortgage lender could technically still quote such rates, they would not be able to do so without higher upfront costs (aka "points").  Based on our apples to apples approach, today's rate would need to be 0.25-0.375% higher to be quoted with the same upfront costs as a rate from Tuesday (before the big spike). 
Basically The Worst Day For Mortgage Rates Since October 2022
Mortgage rates surged at a pace seen only one other time since October 2022.  The average lender moved up by 0.28%, which is functionally equivalent to the 0.29% seen after the February 2nd jobs report.  In fact, today was arguably worse because the Feb 2nd example happened a day after rates hit long-term lows.  The implication is that the jump would not have been as big in early Feb if rates weren't undergoing a correction from those lows. Hair splitting aside, there just aren't many past examples of rates rising more than a quarter point in a day. Before covid, it had happened one other time in the past decade. Translation: it was a rough day for rates.  But why? We've been rather incessantly focused on the risks associated with today's Consumer Price Index (CPI) in the days and weeks leading up to its release.  It ended up exceeding the hype by showing that inflation refuses to head to the lower levels required for a lower interest rate environment.  Today is really that simple. Rates are highly dependent on inflation data at the moment.  We'll get another inflation report tomorrow, but it never operates on the same scale of relevance to rates as CPI.  That's not to say a friendly result wouldn't help, but the data stands an equal chance to be unfriendly, thus compounding today's problems as opposed to taking the edge off. We'll talk more about longer-term, bigger-picture implications on Friday.
Decent Recovery For Mortgage Rates, But Huge Volatility Potential Ahead
Mortgage rates roughly matched their highest levels in months yesterday, but managed to turn things around today.  One could argue that the broader bond market (which dictates rates) began to turn things yesterday morning and that the only reason rates moved higher was the overnight bond market movement.   So today was either a new recovery or a continuation of yesterday's recovery, but none of that matters now.  Wherever we may be this afternoon, we may be somewhere completely different tomorrow afternoon.  While that's true every day the market is open, it's a much bigger version of true today. Why? Tomorrow morning marks the release of the Consumer Price Index (CPI).  Of all the monthly economic reports, this one has the most potential to cause volatility for rates.   Is volatility bad or good?   It's important to understand that volatility is a two way street.  A very low reading on CPI would likely push rates much lower while a very high reading would do the opposite.  Additionally, it is also possible for the data to thread the needle and leave rates roughly unchanged, but the point is that the range of potential outcomes is much wider than normal.
Mortgage Rates Near Highest Levels Since February
Mortgage rates moved up somewhat abruptly today as the bond market lost more ground over the weekend.  Rates are driven primarily by bonds, but mortgage lenders tend to only update rates once per day unless the bond market is moving very quickly. With that in mind, bonds were losing ground on Friday afternoon, but not quickly enough or early enough for a majority of lenders to adjust pricing.  As such, lenders already had some catching up to do regardless of today's bond market weakness.  The combination of the two factors (the "catch-up" and the new weakness) caused today's spike to be bigger than average. That said, there weren't any compelling news headlines or economic reports driving the weakness.  It would be better thought of as a hangover from Friday's jobs report. As the week progresses, there will certainly be at least one major economic report with a proven track record of causing big reactions in rates: the Consumer Price Index (CPI) on Wednesday morning.  With the average lender already near the highest levels since February, a bad reaction to CPI could easily launch rates back to levels not seen since November.  On the other hand, if CPI manages to come in much lower than expected, rates would almost certainly drop.
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