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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.

 

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

 4 days 8 hours 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

 5 days 7 hours 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

 6 days 6 hours 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

 1 week 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

 1 week 1 day 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

 1 week 4 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

 1 week 5 days 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

 1 week 6 days 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

 2 weeks 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

 2 weeks 1 day 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

 2 weeks 4 days ago

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Mortgage Rates Technically at Lowest Levels in a Month
The most prevalently quoted conventional 30yr fixed rates are at the lowest levels in a month as of today, but there are a few "yeah buts" that make that achievement look a bit less lofty.  The first is that the rates seen on any day this week would have qualified for the same distinction if they'd remained intact today.  Reason being: there was a big rate spike last month on April 10.  On a related note, today's rates weren't appreciably lower than those seen on Tuesday. Still... lower is lower and we'll take it! Today's improvement wasn't guaranteed.  It required some sacrifices in the economic data with Jobless Claims coming in higher than expected.  Then in the afternoon, the scheduled auction of 30yr US Treasury Bonds was met with solid demand.  Both events helped put downward pressure on rates with many lenders ultimately issuing mid day reprices with better terms. All of the above has played out in a very narrow range in the bigger picture.  The big spike on April 10th was in a completely different league and it was exclusively a response to the Consumer Price Index (CPI).  With that in mind, the next CPI will be released next Wednesday.  It has just as much power to cause just as big of a move as it did last time, for better or worse. 

  Mortgage Rate Watch

 2 weeks 5 days ago

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Mortgage Rate Winning Streak Ends Gently
Yesterday, we took a look at the recent winning streak for mortgage rates.  Specifically, they had moved lower for 5 straight days--a feat only achieved two other times this year.  While there have been streaks more than twice as long, the odds of a pull-back start increasing pretty quickly at the 5 day mark and today provided fresh evidence. Thankfully, the pull-back was very small with the average lender only moving up 0.01%.  That means many borrowers won't see any difference in today's rate quotes versus yesterday's.  There were no major sources of volatility today for the bonds that underlie mortgage rate movement.  That's a theme for the entire week when it comes to scheduled data.  Unexpected market movers are always a risk, but the biggest risks are tied to a few scheduled economic reports.  Next week's Consumer Price Index remains the best example.

  Mortgage Rate Watch

 2 weeks 6 days ago

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Mortgage Rates Just a Bit Lower as Winning Streak Hits 5 Days
There have been 3 winning streaks for mortgage rates in 2024 where the average rate has moved lower for at least 5 days and where the conventional 30yr fixed rate has fallen by more than 0.25%.  Before today, there were only two.   The present example didn't receive a notable boost from its 5th consecutive day of improvement, and that improvement wasn't readily linked to any obvious root cause in terms of data, news, or events.  In some ways, the bond market's friendly momentum from last week was simply still running its course due to overseas holiday calendars. Specifically, European markets were closed yesterday.  That means they had yet to trade their reaction to Friday's jobs report in the US.  Naturally, Europe is a different continent, and US rates care more about US markets.  But there is always some correlation and spillover between the world's major bond markets with gains in Europe often coinciding with gains in the US.  In terms of MND's daily index, conventional 30yr fixed rates are back under 7.25% for top tier scenarios after being just over 7.5% last week.

  Mortgage Rate Watch

 3 weeks ago

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Mortgage Rates Modestly Lower to Start The New Week
Mortgage rates did well last week, making it almost halfway back to the lower levels seen on April 9th.  Why focus on April 9th?  That was the last day before the most recent Consumer Price Index (CPI). Why focus on CPI?  That's the monthly economic data that matters most to rate movement these days.  It's not the only game in town, but it caused the biggest recent jump, by far. Last week's combination of economic data and reassurance from the Fed was enough to get rates headed back in a friendly direction.  There was some follow-through today, but not for any news reasons.  In fact, "reasons" for rate movement are in far more limited supply this week.  In other words, last week was good and we caught a small break today with the modest improvement in rates, but things could be more choppy and sideways for the rest of the week.

  Mortgage Rate Watch

 3 weeks 1 day ago

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Rates End Week at Lowest levels since April 9th
It was an action-packed week for the housing and mortgage market. Wednesday's Fed announcement was the highlight, but we also got several economic reports that caused rate volatility. Thankfully, it was mostly the good kind. The week got off to a slightly stronger start with Monday's only major rate news being updated borrowing estimates from the Treasury Department.  Why would such a thing matter?  Treasuries largely dictate day to day interest rate momentum in the U.S. because they are abundant, simple, and as close to risk-free as it gets.  As such, Treasuries are the universal yardstick for all other debt in the U.S., including MBS, the mortgage-backed securities that have the most direct impact on mortgage rates.  This is why Treasury yields and mortgage rates correlate so well over time. Treasuries can take cues from several sources.  One of the biggest is the change in the outright level of supply.  In other words, how much more debt is the U.S. government issuing in the upcoming quarter?  If that number is higher than expected, it puts upward pressure on rates. Monday's news from Treasury was fairly palatable and roughly in line with market expectations, which allowed rates to stay steady. Things changed on Tuesday when the Employment Cost Index (ECI) data came out.  This is one of several reports that the Fed has mentioned as being important to the rate outlook recently.  Higher numbers mean higher rates, all other things being equal.  This week's installment showed Q1 costs at 1.2, up from 0.9 in Q4 and well above the market consensus of 1.0.  Rates hit the highest levels of the week as a result, both in terms of Treasury yields and mortgage rates.

  Mortgage Rate Watch

 3 weeks 4 days ago

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Mortgage Rates Sneak to 2 Week Lows With Important Data on Deck
The bond market--which dictates interest rates--had a generally favorable response to yesterday's update from the Federal Reserve.  While the Fed didn't cut rates, and while they're increasingly acknowledging that rate cuts are moving farther into the future, they still think data will evolve in a way that results in the next move being a cut as opposed to a hike. Positive momentum continued today, in spite of several economic reports that argued the opposite case.  Had these reports been top tier market movers, the counterintuitive victory would have been highly unlikely. Friday is a different sort of day in terms of economic data.  The big monthly jobs report is in a league of its own when it comes to labor market data, and while it may not currently be the most important report on any given month, it's a consistent 2nd place behind CPI.  After the jobs report, we'll get a strong 2nd tier contender in the form of ISM's service sector index.   These two reports have the power to accelerate or reverse the friendly tone seen in rates over the past 2 days.  As for today, the average lender inched just barely to the lowest levels since April 12th.  This wasn't the case in the first half of the day, but as bonds improved, many lenders were able to issue mid-day reprices. 

  Mortgage Rate Watch

 3 weeks 5 days ago

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Mortgage Rates Move Lower After Fed Announcement
Wednesday brought a full schedule of events and data for the bond market to digest and bonds dictate day to day changes in mortgage rates.  The morning's data was perfectly palatable, resulting in modest strength heading into the afternoon's Fed announcement. Contrary to impression given by many news headlines on Fed day, there is rarely any significance to the Fed's actual decision to hike/cut/hold steady at any given meeting by the time the meeting actually happens.  Markets will have long since priced in the likely outcome based on economic data and Fed policy transparency. In other words, it was a surprise to no one that the Fed held rates steady at this meeting.  Bond traders tuned in for other reasons--mainly to hear what Powell had to say at the 2:30pm ET press conference. There were a few ways Powell could have framed the recent set-backs seen in inflation data.  Some analysts thought he might say more to entertain the possibility of rate hike instead of a rate cut.  Powell (and, indeed, the Fed announcement itself) definitely acknowledged that inflation data meant a delay for the Fed's next move, but in the press conference, Powell reiterated that the next move was much more likely to be a cut, based on the trajectory of the data.   Bonds improved and many mortgage lenders were able to re-issue slightly lower rates compared to the morning levels.  The average 30yr fixed rate is still elevated by 2024's standards, but nicely lower compared to yesterday's latest levels.

  Mortgage Rate Watch

 3 weeks 6 days ago

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Mortgage Rates Back Up And Over 7.5%
A mortgage rate is highly subjective and can vary for a variety of reasons.  A news story that provides an outright level like 7.5% requires context and qualification.  Some online advertisements (especially among builders) could still be showing rates in the high 6's.  Some borrowers will be seeing rates of 7.625 or higher.  Loans with less than 25% down will have higher and higher costs, either in terms of upfront closing costs or the rate itself.  Investment properties incur significant extra costs as do lower credit scores (you start getting hit for anything under 780 in many cases these days).   These are just a few considerations to illustrate the point that a 30yr fixed rate isn't necessarily apples to apples. Fortunately, we can control for most of the variables by only ever looking at the same scenario, free from most of the subjective adjustments.  We can also control for the practice of advertising lower rates by quoting them with implied discount points (extra upfront cost that goes toward "buying down" the prevailing rate). That's one of the reasons the MND index is higher than Freddie Mac's weekly survey. All that to say, 7.5%+ might not be the exact rate you see today, but after adjusting for everything we can control, that's the most prevalently quoted top tier conventional 30yr fixed rate again today.  It's the 3rd time we've seen 7.5 in the past 2 weeks. Today's increase followed the release or the Employment Cost Index--one of the economic reports the Fed watches closely in determining rate policy.  In not so many words, it suggested higher momentum in price pressures than previously expected.  This wasn't necessarily out of line with any of the other recent inflation-related reports, but the confirmation was worth a bit of extra weakness in rates nonetheless.

  Mortgage Rate Watch

 4 weeks ago

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Mortgage Rates Sideways to Slightly Lower to Start New Week
Mortgage rates didn't change much at all over the weekend with the average lender still in the highest territory since November.  The average conventional 30yr fixed rate is just under 7.5% for top tier scenarios. Things could end up changing quite a bit by the end of this week owing to a slew of important events and economic reports.  The sneak preview of one of those events took place this afternoon as the U.S. Treasury released borrowing estimates for the 2nd quarter.   Why would this matter?   Rates are driven by bonds and U.S. Treasuries are the bonds that set the tone for all other bonds/rates in the U.S.  Bonds can be influenced by a number of factors, but supply and demand always matter to any financial security.  The Treasury department directly comments on the supply side of that equation in these announcements.  When the number is bigger than the market expects, it puts upward pressure on rates, all other things being equal. Today's number was slightly bigger, but the market did a good job of taking that in stride.  The rest of the week's calendar is even more likely to cause volatility--especially on Wednesday and Friday.  As always, volatility can either be good or bad for rates.

  Mortgage Rate Watch

 4 weeks 1 day ago

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