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Mortgage Rate Watch

A new home can be the biggest purchase of your life. Before you start looking for the right home, you may want to research your mortgage options.

But not all mortgages are created equal. So, by doing your research beforehand, you can choose the option that best suits your financial situation and potentially puts more money in your pocket. You also know what guidelines to follow when applying.

Types of mortgages

  • Conventional loan – Best for borrowers with a good credit score
  • Jumbo loan – Best for borrowers with excellent credit looking to buy an expensive home
  • Government-insured loan – Best for borrowers who have lower credit scores and minimal cash for a down payment
  • Fixed-rate mortgage – Best for borrowers who’d prefer a predictable, set monthly payment for the duration of the loan
  • Adjustable-rate mortgage – Best for borrowers who aren’t planning to stay in the home for an extended period, would prefer lower payments in the short-term and are comfortable with possibly having to pay more in the future

Conventional loans, which are not backed by the federal government, come in two forms: conforming and non-conforming.

Conforming loans – As the name implies, a conforming loan “conforms” to the set of standards put in place by the Federal Housing Finance Agency (FHFA), which includes credit, debt and loan size. For 2023, the conforming loan limits are $726,200  in most areas and $1,089,300 in high-cost areas.

Non-conforming loans – These loans do not meet FHFA standards. Instead, they cater to borrowers looking to purchase more-expensive homes or individuals with unusual credit profiles.

Pros of conventional loans

  • Can be used for a primary home, second home or investment property
  • Overall borrowing costs tend to be lower than other types of mortgages, even if interest rates are slightly higher
  • Can ask your lender to cancel private mortgage insurance (PMI) once you’ve reached 20 percent equity, or refinance to remove it
  • Can pay as little as 3 percent down on loans backed by Fannie Mae or Freddie Mac
  • Sellers can contribute to closing costs

Cons of conventional loans

  • Minimum FICO score of 620 or higher is often required (the same applies for refinancing)
  • Higher down payment than some government loans
  • Must have a debt-to-income (DTI) ratio of no more than 45 percent (50 percent in some instances)
  • Likely need to pay PMI if your down payment is less than 20 percent of the sales price
  • Significant documentation required to verify income, assets, down payment and employment

Who are conventional loans best for?

If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is probably your best pick. The 30-year, fixed-rate mortgage is the most popular choice for homebuyers.

Jumbo mortgages are home loan products that fall outside FHFA borrowing limits. Jumbo loans are more common in higher-cost areas such as Los Angeles, San Francisco, New York City and the state of Hawaii, where home prices are often on the higher end.

Pros of jumbo loans

  • Can borrow more money to purchase a more expensive home
  • Interest rates tend to be competitive with other conventional loans
  • Often the only finance option in areas with extremely high home values

Cons of jumbo loans

  • Down payment of at least 10 percent to 20 percent required in many cases
  • A FICO score of 700 or higher usually required
  • Cannot have a DTI ratio above 45 percent
  • Must show you have significant assets in cash or savings accounts
  • Usually require more in-depth documentation to qualify

Who are jumbo loans best for?

If you’re looking to finance a home with a selling price exceeding the latest conforming loan limits, a jumbo loan is likely your best route.

The U.S. government isn’t a mortgage lender, but it does play a role in making homeownership accessible to more Americans by guaranteeing certain types of loans — thus lessening the risk for lenders. Three government agencies back mortgages: the Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA) and the U.S. Department of Veterans Affairs (VA).

  • FHA loans – Backed by the FHA, these home loans come with competitive interest rates, and help make homeownership possible for borrowers without a large down payment or pristine credit. You’ll need a minimum FICO score of 580 to get the FHA maximum of 96.5 percent financing with a 3.5 percent down payment.  However, a score as low as 500 is allowed if you put at least 10 percent down. FHA loans require mortgage insurance premiums, which can increase the overall cost of your mortgage. Lastly, with an FHA loan, the home seller is allowed to contribute to closing costs.
  • USDA loans – USDA loans help moderate- to low-income borrowers who meet certain income limits buy homes in rural, USDA-eligible areas. Some USDA loans do not require a down payment for eligible borrowers. There are extra fees, though, including an upfront fee of 1 percent of the loan amount (which can typically be financed with the loan) and an annual fee.
  • VA loans – VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. There’s no minimum down payment, mortgage insurance or credit score requirement, and closing costs are generally capped and may be paid by the seller. VA loans charge a funding fee, a percentage of the loan amount, which can be paid upfront at closing or rolled into the cost of the loan along with other closing costs.

Pros of government-insured loans

  • Help you finance a home when you don’t qualify for a conventional loan
  • Credit requirements more relaxed
  • Don’t need a large down payment
  • Available to repeat and first-time buyers
  • No mortgage insurance and no down payment required for VA loans

Cons of government-insured loans

  • Mandatory mortgage insurance premiums on FHA loans that usually cannot be canceled
  • FHA loan sizes are lower than conventional mortgages in most areas, limiting potential inventory to choose from
  • Borrower must live in the property (although you may be able to finance a multi-unit building and rent out other units)
  • Could have higher overall borrowing costs
  • Expect to provide more documentation, depending on the loan type, to prove eligibility

Who are government-insured loans best for?

Are you having trouble qualifying for a conventional loan due to a lower credit score or minimal cash reserves for a down payment? FHA-backed and USDA-backed loans could be a viable option. For military service members, veterans and eligible spouses, VA-backed loan terms are often more generous than a conventional loan’s.

Fixed-rate mortgage

Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means your monthly mortgage payment always stays the same. Fixed loans typically come in terms of 15 years or 30 years, although some lenders allow borrowers to pick any term between eight and 30 years.

Pros of fixed-rate mortgages

  • Monthly principal and interest payments stay the same throughout the life of the loan
  • Easier to budget housing expenses from month to month

Cons of fixed-rate mortgages

  • If interest rates fall, you’ll have to refinance to get that lower rate
  • Interest rates typically higher than rates on adjustable-rate mortgages (ARMs)

Who are fixed-rate mortgages best for?

If you are planning to stay in your home for at least five to seven years, and want to avoid the potential for changes to your monthly payments, a fixed-rate mortgage is right for you.

In contrast to fixed-rate loans, adjustable-rate mortgages (ARMs) have interest rates that fluctuate with market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. For example, you might see a 7/6 ARM, which means that your rate will remain the same for the first seven years and will adjust every six months after that initial period. If you consider an ARM, it’s essential to read the fine print to know how much your rate can increase and how much you could wind up paying after the introductory period expires.

Pros of ARMs

Lower fixed rate in the first few years of homeownership (although this isn’t a guarantee; as of late, 30-year fixed rates have actually been similar to those for 5/6 ARMs)
Can save a substantial amount of money on interest payments

Cons of ARMs

Monthly mortgage payments could become unaffordable, resulting in a loan default
Home values may fall in a few years, making it harder to refinance or sell before the loan resets

Who are adjustable-rate mortgages best for?

If you don’t plan to stay in your home beyond a few years, an ARM could help you save on interest payments. However, it’s important to be comfortable with a certain level of risk that your payments might increase if you’re still in the home.

Other types of home loans

In addition to these common kinds of mortgages, there are other types you may find when shopping around for a loan:

  • Construction loans: If you want to build a home, a construction loan can be a good financing choice — especially a construction-to-permanent loan, which converts to a traditional mortgage once you move into the residence. These short-term loans are best for applicants who can provide a higher down payment and proof that they can afford the monthly payments.
  • Interest-only mortgages: With an interest-only mortgage, the borrower makes interest-only payments for a set period – usually five and seven years — followed by payments for both principal and interest. You won’t build equity as quickly with this loan, since you’re initially only paying back interest. These loans are best for those who know they can sell or refinance, or for those who can reasonably expect to afford the higher monthly payment later.
  • Piggyback loans: A piggyback loan, also referred to as an 80/10/10 loan, involves two loans: one for 80 percent of the home price and another for 10 percent. You’ll make a down payment for the remaining 10 percent.These loan products are designed to help the borrower avoid paying for mortgage insurance. But piggyback loans require two sets of closing costs, and you’ll also accrue interest on two loans, making this unconventional arrangement these best for those who will actually save money using it.
  • Balloon mortgages: A balloon mortgage requires a large payment at the end of the loan term. Generally, you’ll make payments based on a 30-year term, but only for a short time, such as seven years. When the loan term ends, you’ll make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared or your credit situation deteriorates. These loans are best for those who have the stable financial resources needed to make a large balloon payment once the loan term ends.

 

Rate Optimism Put To The Test by Jobs Report
There's a strong case to be made for the fact that interest rates had a sunny predisposition this week.  In practical terms, that simply meant giving more credence to rate-friendly news and trying harder to overlook unfriendly news. But the predisposition was put to the test in a major way with the week's most significant economic report today.  Nonfarm Payrolls (NFP) is the headline component of the Labor Department's Employment Situation report.  There are many reports that pertain to the jobs market, but this one is infinitely more important than the rest and this time around, NFP came in much higher than expected. While the chart of nonfarm payrolls looks range-bound, and while the job count has been much higher in the past few years, Friday's result of 272k represented an uncommonly large "beat" versus the median forecast of 185k, and a big jump from the previous reading of 165k. A move like this makes it seem like the labor market is too resilient to offer much help to the inflation problem (more jobs, more money, more spending, etc.).  Finally, the bond market's sunny outlook saw a cloud too big to ignore. With that, mortgage rates had their first (and only) motivation of the week to move higher.  But the chart above also illustrates the silver lining.  Specifically, even though rates jumped on Friday, they're not even halfway back to last week's highs, let alone the higher highs seen at the end of April.  Part of the justification for such resilience is that the bond market will defer to inflation data (and the Fed's interpretation of it) above all else in deciding how worried to be about impediments to lower rates.

  Mortgage Rate Watch

 6 days 9 hours ago

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Mortgage Rates Hold Steady Ahead of Important Economic Data
The outcome of certain economic reports will determine whether the next big move in interest rates is higher or lower.  Two reports are more important than all others in that regard and we'll get both of the them by next Wednesday. Tomorrow's jobs report is the more pressing matter.  It may not be quite as important as next Wednesday's Consumer Price Index (CPI) these days, but it has plenty of power to make or break the day for rates. Today's data was far less consequential by comparison and bonds coasted sideways after a very respectable winning streak over the past 5 business days.  Bonds dictate day to day movement for interest rates.  As such, today's mortgage rates were unsurprisingly right in line with yesterday's. 

  Mortgage Rate Watch

 1 week ago

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Mortgage Rates Improve Again, Despite Headwinds From Economic Data
The phrase "data dependent" is ingrained in the current bond market psychology for good reason.  Weaker trends in economic data will reliably cause the Fed to cut rates when the time comes.  This is particularly true for inflation-related data, but other reports still matter.  One of those reports came out this morning, but things didn't go according to the data dependent script--at least not at first glance. The Institute for Supply Management (ISM) publishes a monthly index on the health of the services sector called the PMI (purchasing managers index).  Apart from the highest of the top tier economic reports, ISM PMIs are some of the most relevant considerations when it comes to data that moves the rate market. Today's Services PMI was HIGHER than expected, and not by a small margin.  This is something that would normally be  bad for rates .  Indeed, that was the bond market's initial reaction, but the first move quickly gave way to a rebound that resulted in even lower rates by the end of the day.  As for the rationale, it could have something to do with a component of the report that showed slightly lower price pressures versus last month.  Combine that with the same message in ISM's manufacturing PMI earlier this week, and the market could be hoping that next week's all important Consumer Price Index (CPI) sings a similar tune.   The average mortgage lender moved one step closer to the lowest levels since early April, but there still a few days in mid May that were microscopically better.  

  Mortgage Rate Watch

 1 week 1 day ago

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Mortgage Rates Another Step Closer to 3-Month Lows
For most lenders, you'd still see modestly lower rates on several days in mid May, but apart from that, you'd need to go all the way back to early April to see anything lower.  Said differently, today's rates are fairly close to the lowest levels in 3 months. If the 3 month distinction is to be earned in the near term, it will come down to the incoming economic data.  Scheduled reports on the labor market, economy, and inflation will help shape expectations for Fed rate policy and thus exert immediate influence on interest rates.  This is a big week for such data with additional reports in the coming days, including Friday's jobs report which is typically one of the two biggest rate movers on any given month. Today's data showed job openings coming in lower than expected for the month of April.  While it's not as timely as the upcoming report on Friday (which is for May), it has nonetheless been important in the past year.  Lower job openings connote lower rates, all other things being equal.   All that having been said, the bond market (which underlies rate movement) had a fairly steady day of improvement, even after attempting to isolate the influence of the job openings data.  This could speak to a bit of anticipation for the rest of the week's data to be similarly downbeat.  The risk here is that the data manages to surprise to the upside and cause a volatile bounce back toward higher rates. 

  Mortgage Rate Watch

 1 week 2 days ago

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Mortgage Rates Fully Erase Last Week's Spike
Mortgage rates had a rough go of it in the 4 days following Memorial Day weekend (i.e. last week). To be fair, the tough part was limited to the first two days.  Thursday and Friday both helped to undo some of that damage, but the average lender was still at higher levels compared to the week before the holiday weekend. That has changed today.  The bond market (which dictates rate movement) was hungry for more economic data to provide directional cues and rates readily responded to today's top offering.  The widely-followed ISM manufacturing index came out weaker than the median forecast, both in terms of overall activity and in the component that measures price pressure.  Prices are still elevated according to this data, but they made a nice move in the other direction, thus putting an end to a disconcerting spike that had dominated the year so far. Sharp improvements in the bond market led to another nice drop in mortgage rates.  The average lender is now back to the lowest levels in nearly 2 weeks, but not yet back to the recent lows seen on May 15th.

  Mortgage Rate Watch

 1 week 3 days ago

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Plenty of Rate Volatility Despite Holiday-Shortened Week
This week got off to a late start as markets were closed on Monday for Memorial Day. Upon returning to the office, traders began pushing rates higher almost immediately. It's often said that the bond market can experience elevated, seemingly random volatility amid the lighter trading participation seen on the days surrounding 3-day weekends.  Tuesday may have been a good example as it brought the biggest move of the week despite an absence of high consequence data. That's not to say that data was completely absent.  Traders digested comments from several Fed speakers with the most memorable example coming from Minneapolis Fed's Kashkari who said he'd need to see "many" more months of good inflation data before the Fed would consider cutting rates.  This is a departure from the average Fed speaker who uses words like "several" to discuss the same dependency.   In addition to Fed comments, there was a condensed schedule of Treasury auctions.  These regularly scheduled auctions account for the "supply" side of supply and demand in the bond market.  Higher supply means lower prices and higher rates, all other things being equal.  In this case, the amount of supply is published well in advance, but the auction process provides a temperature check for investor demand.  The relatively lower demand at this week's auctions also played a role in pushing rates higher in the first two days. Things began to improve on Thursday--not only because auctions were over, but also due to rate-friendly revisions in the quarterly GDP data.  Finally, Friday's PCE inflation data helped add momentum to Thursday's recovery.

  Mortgage Rate Watch

 1 week 6 days ago

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Mortgage Rates Break 5 Day Losing Streak, But Remain Elevated
If we overlook the nearly unchanged performance from last Friday, mortgage rates were on a 5 day losing streak as of yesterday afternoon with the 30yr fixed rising about a quarter of a percent.  That streak ended today as the bond market responded to favorable inflation data and tame comments from the Fed.  We can also consider that some of the recent upward momentum was a factor of this week's Treasury auction cycle which ended yesterday afternoon.  Mortgage rates are based on bonds that tend to correlate with US Treasuries and the latter certainly took some directional cues from this week's scheduled Treasury auctions. Speculation aside, there was a clear reaction to this morning's quarterly PCE Price Index revision.  Even though this data is "stale" by most standards, a mere 0.1% revision lower helped rates drop by 0.05% on average.  While that's a solid victory for a single day, it means that rates remain in much higher territory versus last week. Tomorrow morning brings the more timely, monthly version of the same PCE inflation data. It will be a new release for the month of April whereas yesterday's data was Jan-Mar.  If it is 0.1% lower than expected, that would likely be a much bigger deal for bonds and rates, but there's an equal chance of an opposite result.  Volatility potential is elevated either way.

  Mortgage Rate Watch

 2 weeks ago

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Mortgage Rates Much Higher Over The Past 2 Weeks
Mortgage rates most recently bottomed out on May 15th with the average top tier conventional 30yr fixed scenario being quoted just a hair under 7.0%.  It's been a fairly consistent march higher since then, slowly at first, but more abruptly in the present week. Between yesterday and today alone, rates rose 0.18% on average.  All told the 6.99% average from May 15th was up to 7.34% at the close of business. The pace of the movement continues to belie the fundamental motivations.  Over the past few years, it's most common to see the biggest rate volatility in response to key inflation reports, jobs reports, or Fed announcements.  None of the above have been present during the recent uptrend. The bond market (which underlies and ultimately dictates rate momentum) may have been a bit nervous to underwrite the most recent round of U.S. Treasury auctions which finally concluded this afternoon.  Bonds could also be apprehensive about the forthcoming inflation data in Friday's PCE report.  Last but not least, the final trading days of any given month can always generate some of their own directional influence. Bottom line: the recent pain isn't necessarily a sign of things to come.  It will ultimately depend on the tone of the new economic data in the coming days.

  Mortgage Rate Watch

 2 weeks 1 day ago

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Rates Jump to Highest Levels in More Than 3 Weeks
It was a mini rollercoaster of a day for mortgage rates with the average lender starting the day at lower levels than Friday only to end at the highest levels since May 3rd.  The weakness was driven by a combination of economic data, comments from Fed officials, and weaker US Treasury auctions. There are several small consolations. First off, last week's rates were already in line with 2 week highs.  More importantly, the recent range is fairly narrow, meaning it didn't take much of a jump in the bigger picture in order to see 3-week highs. The average lender is at least an eighth of a percent higher than they were for the equivalent scenario on Friday morning with top tier conventional 30yr fixed quotes in the 7.25% neighborhood

  Mortgage Rate Watch

 2 weeks 2 days ago

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Mortgage Rates Are Actually Higher This Week
It was largely a dull week for financial markets in terms of scheduled data and volatility, but numerous Fed speeches helped reiterate what the market thought it already knew.  Specifically, whereas there was widespread belief in several rate cuts in 2024, the market now only expects 1.  The following chart shows the market's expectations for the Fed Funds rate at the end of the year.  This is a futures contract that has been traded for months.  In other words, when the line was lower in March and early April, it meant the market was expecting a lower Fed Funds Rate in December.  Point being: the orange line in this chart always refers to the December meeting.  The current Fed Funds Rate is 5.375, so anything in the 5.125 neighborhood implies a single 0.25% rate cut. On a more timely note, a rate cut at the July Fed meeting is now seen as a near impossibility whereas it was almost a certainty in early April.  The big spike in April followed the Consumer Price Index (CPI). While this week's data and events didn't do anything to accelerate the negative rate cut sentiment, it definitely didn't push back in the other direction.  Multiple Fed officials gave speeches that reiterated a logical reaction to hotter inflation data in the first quarter.  Here are a few highlights in mostly chronological order: JEFFERSON: THE LARGE INCREASE IN MARKET RENTS DURING PANDEMIC MAY KEEP HOUSING SERVICES INFLATION ELEVATED FOR A WHILE BARR: THE FED WILL NEED TO ALLOW TIGHT POLICY TO HAVE FURTHER TIME TO CONTINUE TO DO ITS WORK BARR: Q1 INFLATION WAS DISAPPOINTING, IT DID NOT PROVIDE THE CONFIDENCE NEEDED TO EASE MONETARY POLICY BOSTIC: ON INFLATION: WE'VE STILL GOT A WAYS TO GO DALY: I AM NOT YET CONFIDENT INFLATION COMING DOWN SUSTAINABLY TO 2% MESTER: INFLATION PROGRESS STALLED IN THE FIRST THREE MONTHS MESTER: THE APRIL CPI REPORT WAS GOOD NEWS, BUT IT IS TOO SOON TO TELL WHAT PATH INFLATION IS ON MESTER: WE CAN HOLD RATES, OR EVEN RAISE THEM, IF INFLATION, AGAINST EXPECTATIONS, STALLS OUT OR REVERSES MESTER: PREVIOUSLY, I EXPECTED THREE RATE CUTS THIS YEAR. I DO NOT THINK THAT'S STILL APPROPRIATE BOSTIC: I WOULD RATHER WAIT LONGER FOR A RATE CUT TO BE SURE INFLATION DOES NOT START TO BOUNCE AROUND WALLER: I NEED TO SEE SEVERAL MORE MONTHS OF GOOD INFLATION DATA BEFORE BEING COMFORTABLE TO SUPPORT AN EASING IN POLICY

  Mortgage Rate Watch

 2 weeks 6 days ago

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Mortgage Rates Jump to 2-Week Highs After Hotter Economic Data
For the most part, the current week is sorely lacking in the sort of scheduled economic data and events that typically contribute to exciting movement in the interest rate world.  This morning's report on the services sector offered one of the only potential exceptions.  For those looking for at least a little excitement, the data did not disappoint.  For those hoping that excitement would be positive, it's a different story. S&P Global's service sector PMI rose to the highest levels in exactly a year, and that effectively matched the highest level in more than 2 years.  Underlying details showed the highest prices in 18 months.  None of the above was good news for interest rates.  Traders immediately sent bond yields higher. Mortgage lenders base their rates on trading levels in the bond market.  The average lender hadn't yet published rates for the day when the S&P data came out.  Those lenders simply began the day at noticeably higher rates about an hour later. Several lenders had already released rates before the data.  Most of that group ended up "repricing" to higher levels not too long after the economic data. In the big picture, 2-week highs for mortgage rates don't mean much.  The range has been fairly narrow over that time.  We'll have to wait for the first half of June for the most important data and events.  That's when the real excitement is most likely to play out, for better or worse.

  Mortgage Rate Watch

 3 weeks ago

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Mortgage Rates Feeling Uninspired as The Market Waits For Bigger News
It was another slow day for the mortgage market and one that joins a list of several other relatively inconsequential days in the past few weeks.  This is a byproduct of the bond market (bonds dictate rate movement) being tuned in to only a few key economic reports and events.  When these reports actually come out, rates move a lot.  But for the rest of the time, the vibes are drifty and sideways. Today's version of "sideways" involved a drift to levels that were just barely higher than yesterday's.  The average mortgage borrower won't see much of a difference either way. Top tier 30yr fixed scenarios are still just over 7% for the average lender, but it's worth keeping in mind that actual quotes will exist in a reasonably wide range round those levels depending on particulars.

  Mortgage Rate Watch

 3 weeks 1 day ago

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Mortgage Rates Stabilize After 3 Day Losing Streak
Referring to the past 3 business days as a "losing streak" for mortgage rates may be a bit harsh.  During that time, the average top tier 30yr fixed rate rose less than an eighth of a percent--the smallest increment typically separating one rate from the next.  This also meant they remained well below the recent highs from late April (another 0.375% higher than yesterday's levels). In nuts and bolts terms, yesterday's average was 7.10.  Today's is 7.05.  And April 30th was 7.51%.  Prefer pictures?  Here you go: [thirtyyearmortgagerates] In terms of the interesting stuff that has an impact on rates from day to day, there really hasn't been much going on this week.  Yes, rates have moved a bit, but the underlying market movement hasn't been clearly driven by any data or headlines.  The only exception would be some volatility this morning surrounding comments from several Fed speakers, but trading levels were not much different than before the comments. Tomorrow brings the release of the minutes from the most recent Fed meeting (3 weeks ago).  In this environment of high transparency and frequent speeches from Fed members, it's hard to imagine that the minutes will cause any drama.  This is a bit of a paradigm shift for some market watchers who have seen the minutes send rates quickly higher or lower in the past.  But that was then, and this is now... probably.  

  Mortgage Rate Watch

 3 weeks 2 days ago

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Mortgage Rates Close Enough to Unchanged Over The Weekend
Mortgage rates moved modestly higher on the two days at the end of last week.  This put an end to a decent winning streak that had been in place since the beginning of the month, but it stopped well short of undoing much of the progress.  Technically, today's average mortgage rates are higher for a third straight business day, but most prospective borrowers won't even notice. For many lenders, the changes are so small that the average borrower won't see any change from scenarios quoted on Friday afternoon.  In cases where there is a difference, that difference would be very small.   There were no significant sources of volatility in the bond market today (bonds drive interest rate changes) and that's a theme that could continue for much of the week--at least as far as scheduled events are concerned.  In other words, there are times when we can point to calendar events that are highly likely to cause rate movement (like last week with the CPI data).  Then there are times like this week where it would not be a surprise to go the entire week without a big reaction to a scheduled event.  If you're a fairly devout market watcher, you may be thinking "what about the Fed minutes on Wednesday?"  While it's true that some past examples of Fed minutes have had a big impact on rates, it's currently hard to imagine what they might contain that would constitute a surprise or new information in the current environment. 

  Mortgage Rate Watch

 3 weeks 3 days ago

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Mortgage Rates Continue Higher For 2nd Straight Day
Mortgage rates have had a great month of May so far with almost every day being a winner up until yesterday and today.  Even then, the 2 day losing streak began from the lowest levels in just over 5 weeks.  Perhaps more importantly, apart from the past 2 days, today's rates would still be the lowest in more than a month. In other words, rates have pulled back only slightly after a solid winning streak.  Granted, you could take an even longer term view and say rates only managed the winning streak because they were at their highest levels in more than 5 months by the end of April, but nobody likes a party pooper. The fact is that everything is almost always relative when it comes to assessing whether rates are doing well or not.  In the biggest picture, little has changed.  Rates are close enough to the highest levels in decades, but they still have a chance to look back at October 2023 as being the long-term high.   Our ability to avoid revisiting last year's highs relies on incoming economic data.  This week's Consumer Price Index (CPI) was palatable enough to keep hope alive, but it will take a better showing in June (and probably July and August) if we hope to see true confirmation of a shift.  

  Mortgage Rate Watch

 3 weeks 6 days ago

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Mortgage Rates Start Sideways But Move Higher in The Afternoon
On the average day in the mortgage market, the average lender will offer the same mortgage rate terms for the entire day.  It's only when the underlying bond market moves enough that lenders will make mid-day adjustments.  Today was one of those days and it involved a reprice to slightly higher levels. For now, this is still fairly inconsequential.  Apart from yesterday (or this morning, for that matter), the average lender would still be at the lowest levels since early April.  Instead of being a hair below 7%, the average top tier conventional 30yr fixed is now a hair above. Today's bond market weakness began after this morning's Import Price data came out much higher than expected, but it continued at a gradual pace through the rest of the day.  This could suggest that the stronger vibes from Wednesday's inflation data have run their course and the rate market will now consolidate as opposed to make additional improvements.

  Mortgage Rate Watch

 4 weeks ago

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Mortgage Rates Back Under 7% After Inflation Data
If it feels like we've been harping on the prospects for rate volatility in response to today's inflation data for several weeks (and we have), today is why.  The Consumer Price Index (CPI) is the biggest reliable source of momentum for interest rates when it comes to scheduled data--big enough that the results can come in right in line with forecasts and still have a big impact.   Indeed, today's results were right in line with forecasts.  In month over month terms, core inflation was 0.3% and annual inflation was 3.6%.  The Fed wants those numbers at 0.1-0.2 in monthly terms and 2.0% annually in order to be more confident about rate cuts.  The annual number wouldn't need to hit 2.0% as long as monthly numbers suggested we were well on our way. And again, today's monthly number only suggested 3.6% (0.3 x 12).  Despite being almost twice as brisk as desired, the 0.3% rate of monthly core inflation was apparently a relief for bond traders who quickly began pushing rates lower.  Mortgage rates are based on mortgage-specific bonds that correlate substantially with US Treasuries.   Other economic data helped the cause with Retail Sales coming in unchanged for April versus forecasts calling for a 0.4% increase.  Taken together, the as-expected inflation data and weaker retail sales suggest cooler inflation pressure relative to Q1's data--something all fans of low rates were hoping to see. Mortgage Lenders were able to drop their average top tier conventional 30yr fixed rate to 6.99% from 7.11% yesterday.

  Mortgage Rate Watch

 4 weeks 1 day ago

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Another "Nice" Day For Rates, But Tomorrow is The Real Story
We've been waiting for tomorrow since April 10th.  That's the last time the Consumer Price Index (CPI) was released.  This is one of the two official consumer-focused inflation indices in the U.S. and it comes out 2 weeks before the also important PCE price index.  With inflation being the top concern for interest rates these days, that makes CPI the most important scheduled economic report when it comes to rate volatility and momentum. People may know that "inflation is high" or that the price of various things is higher today than it was at some point in the past.  Indeed, it may be very easy--even popular--to lament the higher price of things.  But that has nothing to do with predicting how tomorrow will go.   Forecasts are already clear in their expectations for a 0.3% increase in core prices, month over month.  The difference between a result of 0.2 or 0.4 is surprisingly massive when it comes to the world of interest rates.  A 0.1 or 0.5 result could easily result in the largest rate jump/drop in months.   As for today, the Producer Price Index (PPI) offered an appetizer ahead of tomorrow's main course.  Results were mixed, depending on whom you ask, but PPI doesn't tend to elicit much of a response on average anyway.  In today's case, initial weakness (aka "higher rates") gave way to modest strength ("lower rates") and the average mortgage lender was able to offer just slightly lower rates compared to yesterday.  This technically results in another 1-month low, but yet again, only by the smallest of margins

  Mortgage Rate Watch

 4 weeks 2 days ago

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Mortgage Rates Inch to New 1-Month Lows
Last Thursday, mortgage rates merely had to hold steady in order to hit 1-month lows.  In other words, Wednesday's rates were low enough to earn that distinction, but it technically hadn't been a full month since rates were decisively lower.   All that to say, not much has changed since last week when it comes to mortgage rates, but with today's levels being just microscopically better than last week's, we're technically at 1-month lows yet again.   The underlying market movement was calm and boring today.  That is increasingly likely to change in the coming days due to incredibly important economic data on each of the next two mornings. In other words, whereas it was safer to expect small changes and sideways momentum over the past 5-6 days, it would be a surprise to see things stay flat by Wednesday.   The only catch is that no one knows which direction rates will move when they (probably) have something other than a flat, boring day in the next two days.

  Mortgage Rate Watch

 1 month ago

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The Upcoming Week Will Be Significantly More Volatile
In general, you should be skeptical any time someone says a future week will be more volatile. There's really no way to know such things in advance, but this time is an exception. While we can't have any idea which  direction rates will move next week, we can be sure that we'll see more volatility.  Part of the reason is that the outgoing week would have been hard pressed to be any less volatile.  For rates, it was largely an aimless drift apart from two offsetting reactions to calendar events on Thursday and Friday (highlighted below). Thursday's sharper drop in bond yields followed a higher reading in the weekly Jobless Claims data.  This was one of the only economic reports that came out this week.  It showed an abnormally large change that resulted in the highest reading since August 2023.  While this could prove to be an outlier, it got the market's attention in the morning. Thursday afternoon saw relatively strong at the scheduled auction of 30yr Treasury bonds.  In general, strong auctions put downward pressure on yields/rates, all other things being equal.  The present example was worth roughly the same amount of improvement as the Jobless Claims data. While the bond market was already pushing back in the other direction on Friday morning, the Consumer Sentiment data kept things moving in the same unfriendly direction.  This was not the usual case of stronger economic data pushing rates higher.  In fact, headline consumer sentiment was much lower than expected.

  Mortgage Rate Watch

 1 month ago

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