|Mortgage Rates Drop Decisively to New Long-Term Lows
January 30, 2015
Mortgage rates moved lower on 4 out of 5 days this week. Friday’s move was the biggest and brought them to levels not seen since May 9, 2013. 3.625% was widely available all week as a conforming 30yr fixed quote for top tier scenarios. By Friday, 3.5% was becoming increasingly prevalent.
The analogy of the falling knife continues to apply to attempts at timing the bottom of this rate move. Since late December, any time rates have begun creeping higher, they’ve quickly reversed course and made new lows. This trend CAN end any time, but it hasn’t yet, and there’s not a great argument for that to happen until some fundamental changes occur at home and abroad. These are big, slow changes to boot, like inflation and wage growth as well as general global economic growth concerns.
–Matthew Graham, Chief Operating Officer, Mortgage News Daily
30 Year Fixed Rate Mortgage
Week in Review
Rates shown below are based on the 30 Year Fixed Rate Mortgage
Friday, January 23, 2015 : 3.65% (-0.04%)
Mortgage rates were modestly lower today, and are now getting back in line with levels not seen in more than 20 months. Only the last 3 days of last week were any better. That said, the amount of improvement in the mortgage market pales in comparison to other parts of the bond market that are normally much more correlated. For instance, 10yr Treasury yields moved 0.08% lower today. Average mortgage rates barely managed half that.
In general, the broader bond market is insanely volatile and insanely illiquid right now. lliquidity refers not to an absence of volume, but to small numbers of buyers and sellers interested in transacting at any given price. The buying and selling of bonds (which includes the mortgage-backed securities) moves rates higher and lower. The more buyers and sellers there are, the easier it is for markets to hone in on a price and manage volatility. The secondary mortgage market thrives on liquidity and price stability. The more volatile bond markets are, and the harder it is to find a buyer or seller, the less valuable mortgage-backed-securities become relative to other, less tempermental investments.
More detail: “Mortgage Rates Move Back toward Long-Term Lows”
Monday, January 26, 2015 : 3.64% (-0.01%)
Mortgage rates were unchanged in most cases today, though some lenders were microscopically higher or lower compared to last Friday. Any attempts at more meaningful market movement were seen in the overnight trading hours in Asia and Europe. Rates stood a good chance to improve after election results in Greece, based on the market’s reaction overnight. By morning, however, bond markets (which inform mortgage rates) were right back were they spent most of Friday, thus leaving us with the relatively unchanged mortgage rate sheets. Most lenders are still quoting 3.625% for top tier conforming 30yr fixed scenarios.
Apart from the overnight drama in Europe, there wasn’t much going on domestically today. In general, markets are still sorting out their reaction to last week’s even bigger news regarding Europe’s new Quantitative Easing measures. Today is the first day where European Bond markets took a break from the relative euphoria that pervaded Thursday and Friday’s trading. If that ‘break’ continues tomorrow, it would increase the risks that the recent trend toward long-term low rates is at risk of shifting.
More detail: “Mortgage Rates Unchanged Amid Lack of Motivation”
Tuesday, January 27, 2015 : 3.62% (-0.02%)
Mortgage rates continued a recent pattern of small day-to-day changes today. This time, however, lenders were more unified in a move to slightly lower rates. The recent norm has been for different lenders to move in different directions but for the average to stay fairly close to unchanged. 3.625% remains intact as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. A few lenders are already back down to 3.5% though the costs are still a little higher than they were two weeks ago.
This morning’s economic data provided an initial boost for rates markets as the important Durable Goods report was much weaker than expected. Weak economic data tends to benefit bond markets and hurt stocks. That said, stocks were already arguably under pressure related to earnings season. When they bounced back in the afternoon, bond markets followed, resulting in several lenders raising rates later in the day.
More detail: “Mortgage Rates Improve Modestly Ahead of Fed Announcement”
Wednesday, January 28, 2015 : 3.60% (-0.02%)
Mortgage rates fell again today, and while the move wasn’t big, it was enough to bring most lenders back in line with the best rates from two weeks ago. Those have the added distinction of being the best rates since May 2013. At these levels, 3.625% is widely available as a top tier conforming 30yr fixed quote and a few lenders are quoting 3.5%. Even if your lender isn’t, you can likely choose to pay higher upfront costs in exchange for the lower rate. This is neither good nor bad, but simply a matter of personal preference. You can divide the upfront cost increase by the monthly payment savings to determine how many months it would take to break even on the additional expense. If the trade-off makes sense to you, it makes sense. If not, stick with the higher rate.
More detail: “Mortgage Rates Back to Long Term Lows After Fed”
Thursday, January 29, 2015 : 3.61% (+0.01%)
Mortgage rates were steady to slightly higher today on average. Some lenders were actually slightly lower, but they were the exception. In contrast to yesterday, the bond markets that underlie rate movements were exceedingly calm, and what little movement there was came in measured doses. This sort of low-altitude, sideways bounce is a fairly common occurrence following a bigger move lower in bond markets.
The distinction between bond markets and mortgage rates is important here, because mortgage lenders haven’t been able to pass along all of the gains implied by trading levels. If markets manage to calm down a bit, that means rates have some room to improve even if trading levels simply hold steady. That process can only happen gradually over multiple days and could easily be thrown off by more volatility.
More detail: “Mortgage Rates Holding Near Long-Term Lows”
Friday, January 30, 2015 : 3.55% (-0.06%)
Mortgage rates moved lower today at their fastest pace since January 14th. Rates sheets moved well past recent lows and back to levels not seen since May 10th 2013. That was the day that the Wall Street Journal’s Hilsenrath suggested the Fed was mapping an exit from stimulus, which sent markets into the tailspin that was effectively the prologue to the taper tantrum. It’s amazing, or at least interesting to consider that asset purchases have now been fully phased and that a rate hike is a much more immediate threat, yet rates are back to where they were before markets really began adjusting for all that “stuff.” That’s the power of global economic turmoil and a troubling lack of inflation for core economies.
More detail: “Mortgage Rates Shoot Past Recent Lows; 3.5% Getting More Prevalent “