Tag: #mortgagerates #mortgagenews # mortgage

After a sharp increase to start the year and significant improvements between April and mid July, mortgage rates have been fairly flat for more than a month.  That’s definitely not a bad thing considering how close they are to all-time lows with best-case 30yr fixed scenarios still under 3.0%.

Change is coming though, for better or worse.  Rates could actually move lower, but not for reasons that we’d like to see.  Any significant move lower in rate would require a deterioration of “the outlook”–a term that’s intentionally ambiguous here as it encompasses the outlooks for covid, the economy, and Fed policy.

It will take time to get a clearer read on the covid outlook given the inception of a new school year.  It will therefore also take time to understand how economic momentum is affected by the covid outlook.  If that’s not already enough interdependence, there’s the issue of potential labor market shifts due to the new school year (the theory is that a meaningful number of workers may return to the labor force as their children are back to in-person school for the first time in more than a year).  And of course those labor market dominoes depend on schools remaining open despite covid spreading at a record pace in some states.

Mortgage rates are only adjusted once per day by default.  From there, the underlying bond market would need to improve or deteriorate by a certain amount for the average lender to go to the trouble of a mid-day reprice.  A small handful of lenders did that last Friday (bonds were deteriorating), but the losses were small enough to avoid forcing most lenders’ hands.  

By abstaining on Friday, the average lender was forced to adjust today’s rates slightly higher to account for the bond market weakness.  In other words, this morning’s rates were higher than Friday morning’s.  

As the day progressed, mortgage bonds improved enough for a friendly mid-day reprice.  A majority of lenders pulled the trigger, thus helping rates close the gap with Friday’s rates.  Simply put, rates started the day moderately higher versus Friday morning, but are now only marginally higher (assuming the lender in question offered a mid-day price improvement). 

Rates are on hold until the next chapter is written in the complex saga of covid versus the market. This isn’t to say rates perfectly flat–simply that the prevailing momentum has been sideways for the past few weeks. 

Since mortgage rates only change once or twice a day, we can use 10yr Treasury yields to see finer detail.  This entire week took place in the fairly narrow range of 1.29 to 1.21, and it ended with yields precisely in the middle at 1.25%.

What’s the point?  Bonds (and thus “rates”) are muddling through a period of indecision as they wait for clarity.  Bonds ultimately care most about things like the economy and Fed policy.  In turn, the economy and the Fed have a lot riding on the covid outlook. 

The burning question: Will the delta surge do even a fraction of the damage to the economy seen during the initial covid surge?