Mortgage Rates

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Mortgage Rates Vary Widely--Nothing To Do With The Fed

Thu, 2020-09-17 22:15
Yesterday's policy announcement from the Federal Reserve had a chance to cause significant volatility for the bond market and the bond market is the chief ingredient in the mortgage rate equation. But this time around, the Fed didn't cause a measurable reaction in the mortgage market. I'm frequently asked whether mortgage rates are 0% since the Fed just kept rates at 0%. People hear a headline on the news or a radio soundbyte mentioning the words "Fed, rate, zero," and then assume the Fed just made some change that dropped rates to zero percent. After all why would there be so many news headlines about it if the Fed merely kept its policy rate unchanged?! It's a fair question in that sense, but understand that the Fed's rate decision will always make the news, even if the rate is the same as

What Will The Fed Do to Mortgage Rates?

Tue, 2020-09-15 23:03
What will the Fed do to mortgage rates ? This is actually a bit of a trick question . The Fed doesn't set mortgage rates. The Fed's policy rate applies to overnight loans between large financial institutions. The only way it directly influences mortgage rates is by serving as the basis for the PRIME rate. Home equity lines of credit (HELOCs) are often based on the Prime Rate. For all other mortgage rates, charting a connection to the Fed Funds Rate is significantly more challenging. Indeed, there are many examples of mortgage rates moving in the opposite direction. In other words, mortgage rates have often fallen after a Fed rate hike and vice versa. But the Fed Funds rate isn't the only aspect of Fed policy. It's in those other policy tools that we find much better correlation between Fed

Getting a Mortgage Soon? Read This Now!

Fri, 2020-09-11 22:12
If you're in the mortgage process currently or if you will be soon, there is a tremendously important development to be aware of. The net effect is that rates are about to go up and, in some cases, they already have . The culprit is the new "adverse market fee" announced for all refinances guaranteed by Fannie Mae or Freddie Mac on or after December 1st. To hit that date with some lenders, your loan would need to close by mid-to-late October! Given the high demand for mortgages, new loans will take at least that long in many cases. The fee will result in rates moving higher by 0.125-0.25% (or in additional closing costs equal to 0.5% of the loan amount). While that might not sound significant, this is the biggest change of its kind, ever . We already had a sneak preview of the fallout when

No, Mortgage Rates Are Definitely Not Back to All-Time Lows!

Thu, 2020-09-10 23:47
It's Thursday and thus time, once again, for the weekly mortgage rate survey from Freddie Mac. News organizations and even some bond market strategists (sadly) rely on Freddie's weekly update for a sense of mortgage rate movement. That's why an overwhelming majority of the new mortgage rate articles on any given week come out on Thursdays. Unfortunately , the unified onslaught of news coverage adds unjustified credibility to what is at best stale information. This creates uncomfortable conversations for loan originators and their clients who ask why their recently quoted rate isn't any lower. After all, today's rates are at all-time lows, right?! Wrong... And that's not just a halfhearted "wrong" due to some technicality or tricky math. Today's rates are actually and unequivocally not even

Mortgage Rates Staying Fairly Steady

Wed, 2020-09-09 21:21
Mortgage rates haven't moved much so far this week and they were surprisingly steady at the end of last week despite volatility in the underlying bond market. What does the bond market have to do with rates? Typically everything! But times are a bit different right now for a few reasons. The most pressing consideration for mortgage rates in recent weeks has been the introduction, delay, and impending reintroduction of a new fee that will apply to all conventional refinances. That fee effectively raises rates by 0.125-0.25%. The damage was even bigger at first due to the way it was implemented. As such, when the fee was delayed 2 weeks ago, it allowed lenders to improve mortgage rates regardless of bond market volatility. In the bigger picture , mortgage rates have already encountered quite

The Uncommonly Strong Case For Locking a Mortgage Rate

Fri, 2020-09-04 21:38
Almost everywhere you look, low mortgage rates are in the news. Experts are claiming they'll remain low or move lower for years to come. They might be right! But that doesn't necessarily mean you should wait to refinance or to lock your rate if you're already in the loan process. It is true that mortgage rates improved noticeably earlier this week. Part of the improvement is due to overall gains in the bond market following last week's Federal Reserve scare. When the Fed updated its policy framework, the bond market was briefly spooked. A spooked bond market means higher yields/rates. The next 5 business days brought a deliberate recovery for longer-term rates. This can be seen in the following chart of 10yr Treasury yields (a benchmark for all longer-term rates in the US). Definitely make

Mortgage Rates Balking at New Record Lows

Thu, 2020-09-03 22:20
Mortgage rates have improved nicely over the past week. While a lot of this improvement is due to the delay of the new refinance fee announced earlier this month, the broader bond market has helped. For instance, 10yr Treasury yields--often viewed as a benchmark for mortgages and other long-term rates--have fallen every single day since last Friday. When 10yr Treasury yields are falling, mortgage rates typically fall in rough proportion. When it comes to that general rule linking Treasury and mortgage rates, 2020 has seen the biggest exceptions in history . There were two reasons for this at first. The mortgage bond market wasn't nearly as capable of coping with heavy volatility in March for a variety of reasons. Lower relative demand for mortgage bonds means that mortgage rates will move higher

Rates Heading Back to All-Time Lows, But it Won't Last

Wed, 2020-09-02 21:58
Mortgage rates have improved noticeably in the past few business days, largely due to the delay of a new fee announced earlier this month. Ironically, that same fee is the reason rates are about to move higher, just as many lenders are back within striking distance of all-time lows. The fee applies to all refinances sold to the housing agencies Fannie Mae and Freddie Mac on or after December 1st. That may seem like a long time from now, but those sales tend to take place weeks after a loan actually closes. In fact, several lenders have already reintroduced the fee on loans locked for 60 days or more. For other lenders, it's only a matter of time. Most lenders will announce their game plan for reintroducing the fee, but at least a few will just flip the switch with no advance notice. How do

Here's Why Mortgage Rates Are Outperforming

Tue, 2020-09-01 21:41
For most lenders, mortgage rates improved again today, adding to the 3-week lows achieved yesterday. We normally view mortgage rate movement primarily as a function of the bond market, but the bond market says rates should only be falling modestly from their recent highs. What gives? This is a 2 part issue. First , there's a difference between the overall bond market and the bonds that underlie mortgages. So-called mortgage-backed securities (MBS) did a better job of holding their ground in August when compared to the broader bond market via the quintessential 10yr Treasury yield. Second, and more importantly, the delay of the recently announced adverse market fee (an abrupt hit to all conventional refinances that unintentionally also affected purchase rates) is responsible for the lion's share

Mortgage Rates Are Handling The Fed News Very Well. Here's Why

Fri, 2020-08-28 22:30
Mortgage rates didn't move much today, and the direction of that movement depends greatly on how any given lender reacted to the week's big news from the Fed (more on that here ) and the FHFA (more on that here ). Some lenders lowered rates very quickly after the FHFA news. That occurred on Wednesday afternoon or Thursday morning depending on the lender. Then the Fed news hit and almost every lender pulled back--some more than others. Refreshingly though, the damage in the mortgage market was much smaller than what we'd normally expect to see given the damage in the Treasury market. This is all made possible by the fact that bond markets continue to allow for rates to be much lower than they currently are and that lender capacity is the key limiting factor (i.e. if they dropped rates any faster

Don't Be Fooled By Today's Mortgage Rate News

Thu, 2020-08-27 21:58
Let's keep this short and simple. There are some major misconceptions out there today and for many of you, it's very important to address them. What are the misconceptions? Misconception 1: Rates are lower today than they were yesterday This one is very easy to clear up. It's a frequent Thursday occurrence, actually. It stems from the weekly release of Freddie Mac's mortgage market survey which admittedly only collects responses on Mon-Wed. In other words, if rates were lower on Mon, Tue, Wed this week compared to the same 3 days last week, Freddie's survey will say as much. From there, the scores of journalists who rely on this survey for their weekly mortgage rate coverage will pump out headlines that neglect to mention the Mon-Wed caveat. The net effect is that Today's rates could be higher

What's Going On With Mortgage Rates? A Definitive Guide As Of August 26th, 2020

Wed, 2020-08-26 22:29
With several major developments and interesting milestones in the mortgage world, I'm seeing a lot more confusion than normal. So let's clear it up without too many extra words or meaningless rants. I heard rates were 1.99%. What's up with that? Ever paid more upfront in exchange for lower cost over time? 1.99% is that simple, and it was aggressively/cleverly marketed. The average borrower tends to choose a higher rate over the bigger upfront costs associated with 1.99%. Read more on it HERE . I heard there was some fee a few weeks ago that made mortgage rates 0.5% higher! Sort of... Remember, mortgage rates themselves are only one part of the equation. There's also the option of paying more or less upfront to make that rate higher or lower. In fact, whether you see it or not, there's a cost

Best Housing Market Since 2007, But There's a Catch

Fri, 2020-08-21 22:24
Several new reports confirm the housing market is soaring right now, but the headlines don't tell the whole story. On Friday, the National Association of Realtors (NAR) reported July's existing home sales came in at an annual pace of 5.86 million homes. This crushed forecasts calling for 5.38 million, and demolished last month's reading of 4.70 million. To top it all off, we haven't seen a higher number since 2007! Great news, right? Actually, yes , this is great news. The home sales market is doing every bit as well as anyone could hope for given the circumstances. But visual takeaway on the chart is misleading . Our eyes might see the blue line at the highest levels since 2007 and conclude the housing market is as strong as it's been since then. In a way, it is. July's home sales were indeed

Mortgage Rates Are Actually Lower This Week

Thu, 2020-08-20 22:21
Mortgage rates moved a bit lower today, on average, but that's not what most of the mortgage-related headlines are saying today. Reason being, journalists and even many mortgage market participants rely heavily on Freddie Mac's weekly survey for a regular update on mortgage rate trends. The survey says rates are slightly higher. That was a true story a few days ago, but it's old news at this point. Freddie's survey mostly tracks Monday's and Tuesday's rates and it completely ignores Thu/Fri rates. In the current cycle, last Thursday was the worst day in a long time (by far). It wouldn't have taken much of a recovery for rates to be lower this week, even though they remain higher than they were at the beginning of last week. Compared to Thursday and Friday, however, the average lender is in

Mortgage Rates Still Battling Hangover From Last Week's Drama

Wed, 2020-08-19 23:28
Mortgage rates are still coping with the after-effects of last week's surprise implementation of a new fee on refinances. The fee in question is technically an LLPA (Loan-Leve-Price-Adjustment). LLPAs are a normal part of the mortgage pricing process and they help lenders account for different risk factors (credit score, equity, occupancy, etc.). The new refi LLPA is a bit different in that it's in a sub-category known as an "adverse market fee." This is the agencies' way of collecting extra money to compensate for extra risks--hopefully transitory ones. None of the above would have been a big deal for the mortgage industry had the new fee been rolled out like every other fee: with plenty of advanced notice and in logical, palatable amount. As it stands, it more than doubled the average fee

Still Reeling From Last Week, Mortgage Rates Tiptoe Lower

Mon, 2020-08-17 22:16
Mortgage rates managed to improve modestly for the average lender today, but they remain significantly higher than they were before last week's regulatory drama . By the time we consider the size, scope, and the precipitous imposition of the new refi fee, we've never seen anything remotely similar. Lenders were definitely taken by surprise and they'll definitely be paying dearly for all refis that were already locked. When lenders get big, negative surprises concerning profitability or new cost requirements, they tend to raise rates very quickly and by a larger-than-necessary amount. As such, a fee that should theoretically result in an eighth of a point increase in conventional refinance rates instead resulted in a 0.25-0.375% increase to all conventional rates. If 2.75-2.875 was a strong

Mortgage Rates Are Not 1.99%. In Fact They're Back Over 3%

Fri, 2020-08-14 22:50
Some mortgage companies have generated buzz by advertising 30yr fixed rates of 1.99%. While it is possible to obtain such a rate, there is definitely a catch. Rates are certainly low in the big picture. Up until this week, they were as low as they've ever been . The average lender was easily able to do a conventional 30yr fixed in the high 2% range for ideal scenarios. The situation has deteriorated fairly rapidly since then. More on that in a moment. For now, let's pretend rates are still at all time lows, because even when that was the case, 1.99% still wasn't what it appeared to be. The key concept that will help us understand why we could see 1.99% advertised when the average lender is almost a full percentage point higher is that of upfront costs vs interest rate. Fortunately, it's pretty

Mortgage Rates Pummeled By Regulatory Drama

Thu, 2020-08-13 23:35
At face value, the bonds that underlie the mortgage market didn't sustain too much damage today. If there was nothing else to inspire lender rate changes, we might not be too much worse vs yesterday. Unfortunately, there is an absolutely massive source of motivation that unexpectedly burst on the scene last night. If you're not already up to speed on it, READ THIS . As far as today is concerned, rates got torched . This is no surprise. Regulators just instantly doubled to fees they charge to provide guarantees for the mortgage market. Lenders will be forced to pay those fees on all loans that are already locked. Consumers will foot the bill for everything else. Strikingly, the pull-back from lenders is much bigger than the 0.5 points imposed by the GSEs because of the way the announcement was

Mortgage Rates Move Higher Again, And They Might Not Be Done

Wed, 2020-08-12 22:43
Mortgage rates jumped yesterday at the fastest pace in more than 2 months. While that isn't necessarily the end of the world when a 30yr fixed can still be had in the high 2% range, it wasn't fun for those with loans in process. Today wasn't great either. While the pace of upward movement slowed considerably, rates moved higher yet again today, bringing the average lender to the worst levels in almost exactly a month. While there's never any way to know where rates will be at any given point in the future, we do know that this week represents a clear break from the trend seen during the previous 2 months. From early June through early August, mortgage rates moved lower at an incredibly calm and consistent pace, hitting multiple record lows in the process. Yesterday was the first major push

Biggest Jump in 2 Months For Mortgage Rates

Tue, 2020-08-11 22:28
With most lenders still easily able to quote a 30yr fixed under 3% , mortgage rates are very low in outright terms. But relative to the recent trend and the general level of volatility, today was a bit rough. Rates rose as fast as they've risen since early June, ultimately hitting the highest levels in more than 2 weeks. Some prospective borrowers will now be looking at an eighth of a point (0.125%) increase versus yesterday's rates. That comes out to roughly $20/month on a $300k mortgage. Others will experience the shift in the form of higher upfront costs (or a lower lender credit). Either way, today is noticeably more expensive than yesterday. The bigger question is whether this rate spike is a sign of things to come or merely a normal market correction that got a bit carried away. At some