Mortgage rates are driven predominantly by the bond market and bonds were able to clear up a few curiosities on inauguration day.  Specifically, traders expected multiple executive orders with several focusing on proposed tariffs.  While history suggests the conventional wisdom may be faulty, the general belief is that tariffs increase inflation. Considering inflation correlates with higher rates, there was some relief in rates when the executive orders concerning tariffs turned out to be less aggressive than expected.  In not so many words, the president ordered various agencies to asses trade agreements/deficits and recommend measures to address them, such as tariffs. Bonds were thus able to hold onto the gains from last week with some additional improvement today.  The average mortgage lender wasn't eager to adjust rates, however, with the top tier 30yr fixed rate remaining unchanged from last Friday.

Mortgage rates are driven by the bond market and Friday was the least active day of the week for bonds.  There were no major economic reports to cause rapid changes in trading levels. As such, mortgage rates started out very close to the levels seen yesterday and most lenders didn't make any mid-day changes. The absence of any significant movement is a victory, of sorts, in light of the ground covered over the past 2 days (the best 2-day improvement since November). On the other hand, rates began the week at the highest levels since May 2024. It's more common to see bigger gains when rates are recovering from long term highs--a fact that detracts from the victory to some extent. Bonds are closed on Monday for the holiday and Tuesday could see a flurry of market activity in response to political news. There's no way to know if that activity would be good or bad for rates ahead of time, let alone if it will even materialize in the first place. [thirtyyearmortgagerates]

After having a great day yesterday, mortgage rates were able to add another "good" day today.  The net effect brings the average lender's top tier 30yr fixed rate back down to levels last seen on January 2nd, exactly 2 weeks ago.   Yesterday's key motivation was the palatable inflation data in the Consumer Price Index (CPI).  Today's economic data wasn't nearly as pertinent to the outcome although a slightly softer reading on Retail Sales didn't hurt this morning.  Rather, it was comments from a member of the Federal Reserve (Waller) and the Treasury Secretary nominee (Bessent). Waller said he sees inflation continuing to fall into line along with the possibility of more Fed rate cuts in the first half of the year. Rates didn't have a huge reaction to that, but it was a friendly one nonetheless.  Bessent fielded questions during his confirmation hearing and bond markets were pleased to hear his level of austerity with respect to government spending--something that contributes to higher rates indirectly, but significantly. 

We knew that today's Consumer Price Index (CPI) was a hotly anticipated economic report that at least had the potential to give rates a big push, and it didn't disappoint. Any time we're dealing with an important economic report that gives rates a big push, there's generally an equal chance of getting pushed in either direction.  We can know this with confidence because rates are based on financial markets and traders wouldn't wait to make their move if they already knew what that move would look like. All that having been said, there are occasionally situations where these pushes end up being more likely to be bigger in one direction vs the other.  Today could be argued to be benefiting from such a phenomenon simply because rates were at the highest levels in 8 months over the past few days.  Some of the biggest single day rate drops we've seen have followed a similar formula (i.e. rates at long term highs followed by an obviously rate-friendly economic report). The past examples of this have only tended to involve 2 economic reports: the jobs report (which hurt us last week) and the Consumer Price Index (CPI), which helped us today. Long story short, the relevant components of the CPI data were lower than the market expected.  Bonds improved immediately and lenders were able to move rates back down to the levels seen earlier last week. Granted, the levels seen earlier last week were still the highest in many months at the time, but any move back toward lower rates has to start somewhere.  We won't know how long this one will last until we see the extent to which additional economic data supports the same conclusion.  

Mortgage rates officially hit the highest levels since May 2024 yesterday, even though the average was almost imperceptibly higher than last Friday's.  We saw a similarly small move today, but in the opposite direction. In other words, the average rate moved lower by an amount that won't even have an impact on many of yesterday's rate quotes. As always, keep in mind that our rate index is an average of multiple lenders and on days with very small changes, some lenders can be noticeably better or worse compared to the previous day. This morning's economic data featured the Producer Price Index (PPI)--a report that measures inflation at the wholesale level.  It came in at lower levels than expected.  That would normally be good for rates, but it didn't have much of an impact today.  Tomorrow's inflation report--the Consumer Price Index (CPI)--is in a different league. If it undershoots forecasts by the same margin, rates would almost certainly move lower.  Conversely, rates would almost certainly rise if inflation overshoots forecasts. There's no guarantee of rate-friendly data tomorrow simply because today's inflation report was lower than expected. CPI frequently departs from PPI on any given month, even though the two tend to do the same things over longer time horizons.