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Mortgage Rates Only Modestly Lower Despite Seemingly Big News
Ask your favorite curmudgeonly old market watcher and they'll be happy to explain what "always" happens in financial markets when there's breaking news regarding large scale geopolitical risk. It would be a surprise if you didn't hear a phrase like "flight to safety," the most common shorthand reference to selling stocks and buying bonds. Why would mortgage rates care about all that? A few reasons... First off, rates are driven by bonds. "Buying bonds" would help rates move lower, all other things being equal. Another reason to care is that, within the last 24 hours, the U.S. authorized Ukraine to use long range missiles to attack Russia, Ukraine has already attacked Russia, and Russia has already threatened to respond with nuclear weapons in not so many words. Feed those details into a magical trading computer and it would predict exactly what we saw in overnight trading. Stocks fell and bonds/rates improved. The computer would likely vastly overestimate the size of the improvement in rates, however, as well as the fact that stocks would end up higher by the end of the day. All that to say that the improvement in mortgage rates was wholly underwhelming relative to the news headlines--likely because it's far from the first such threat from Russia, or because traders are skeptical that anyone wants to push any of the red buttons on the "mutually assured destruction" machine. [thirtyyearmortgagerates]
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Mortgage Rates Didn't Move Much Over The Weekend
The average top tier conventional 30yr fixed rate was just a hair over 7% on Friday afternoon and the same is true at the start of the new week. Rates are based on bonds, but while bonds move constantly throughout the day, mortgage lenders only adjust rates once per day unless there's excessive volatility in the bond market. This concept has been important, recently, because there's been more intraday volatility than normal. Intraday volatility came into play on Friday afternoon, but too late in the day for almost any lender to do anything about it. As a result, the bond market implied slightly higher rates this morning, simply because lenders never got around to raising rates on Friday afternoon. The net effect is modestly paradoxical: the bond market is actually slightly better (i.e. bonds are saying rates should be a bit lower), but the average lender is actually offering slightly higher rates versus Friday. Fortunately, the difference between "higher" and "lower" in this example is so small that no one will care, but it's important to understand HOW these things transpire in order to make sense of more serious examples. As for the risk of more serious volatility, the only sure bet is that the first two weeks of December are the most important 2 weeks left in 2024. This has to do with the economic data on tap and its impact on the Fed announcement that will follow on the 3rd week. The time between now and then is anyone's guess. All we know is that rates have been trending gradually higher without any signs of major reprieve. That could change in the near term, but not likely in a way that sends rates sharply lower. In other words, the best victory we could hope for would be for rates to simply avoid making new long-term highs. In that sense, today was a victory.
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Mortgage Rates End Higher, But Not As High as This Morning
This afternoon's mortgage rates are higher than yesterday's latest levels. That's a result of bond market weakness seen late yesterday and earlier this morning. Why would yesterday's market movement matter? Simply put, it was too late in the day for many lenders to go to the trouble of adjusting their rate sheets. Bonds continued to weaken this morning, making it an easy call for mortgage lenders. The average lender was very close to the highest levels of the past several months seen on November 6th. Fortunately, bonds managed to improve after that and most lenders were ultimately able to offer positive reprices. This wasn't enough to get rates back to yesterday's levels, but it erased about half of the weakness.
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