While this week's rates were substantially higher than most of last week's, if we remove a few flashes of volatility,  the average lender stayed very close to Monday morning's levels.  Wednesday afternoon and Thursday mid-day definitely saw multiple negative reprices, but in each case, the bond market recovered enough to limit the volatility.  Compared to last week, it may as well have been a flat line. The following chart shows the mortgage backed securities (MBS) prices that directly dictate mortgage rate movement.  Higher prices = lower rates and vice versa. Today's economic data included a wholesale inflation report that has occasionally caused some volatility, but today's installment was not one of them.  The bond market improved a bit heading into the afternoon and traded calmly from there.  As such, mortgage lenders were not compelled to make any negative mid-day changes after setting this morning's rates very close to yesterday's latest levels.  The next time lenders have a chance to set mortgage rates for the day will be Tuesday due to the market closure on Monday for Indigenous Peoples' Day.  

We can appreciate that the daunting task of determining what "the" actual mortgage rate may be at any given moment.  The word "the" is singled out in the previous sentence because there isn't one, perfect, singular, "going rate" for a mortgage.  There's a bell curve with most lenders near the center and a few outliers at the margins.   The only thing that comes close to being a constant across multiple lenders would be the bond market.  Specifically, prices of mortgage-backed securities (MBS) determine the value associated with loans originated by mortgage lenders.  Still, there are numerous variables that lenders control that determine what rates they can offer for any given price level of MBS. Looking at an individual rate quote from an individual lender is one way to know something fairly specific about rates, but of course things can still change for a variety of reasons between the initial quote and the closing table. In order to get a general idea of where mortgage rates are, it's common to turn to a rate index.  In terms of circulation and historical availability, Freddie Mac's weekly rate index is the only game in town.  Unfortunately, in terms of accuracy, on shorter time horizons, it leaves something to be desired--especially for those interested in knowing day to day changes.  Freddie's survey is a 5 day average collected from Thursday through Wednesday and then reported the following day.  When things are moving quickly, that means several inputs to the equation will no longer be relevant.  We've also noticed that Freddie can quite simply undershoot the reality of a big, directional move, like the one we've seen take shape over the past 5 days. There's no telling why this occurs, but it could have something to do with the fact that--even after methodology changes--Freddie's survey still involves human input of rates that aren't necessarily available anymore.

Today brought the release of the minutes from the most recent Fed meeting in addition to numerous Fed speeches and the scheduled auction of 10yr Treasuries.  Each of these events has at least some track record of causing volatility for interest rates, but none of them had an impact today. As for the Fed Minutes, it's no surprise to see a lack of response.  The minutes are simply a more detailed account of the meeting that took place 3 weeks ago.  A lot has happened since then--especially last Friday's jobs report. Speeches by various Fed officials also held few surprises for financial markets.  When the shoe had been on the other foot, Fed members commonly reminded the market not to place too much focus on a single month of economic data or a single report.  Granted, the single jobs report also provided upward revisions to the previous reports, but even that's not enough to suggest a change in tack from the Fed--especially when Powell was already clear that the initial 0.50% rate cut is no guarantee that subsequent cuts would be the same size. Despite the absence of inspiration, the bond market drifted into slightly weaker territory.  That normally connotes higher mortgage rates, but due to the timing of intraday volatility, many lenders are right in line with yesterday's levels.  Lenders who offered mid-day improvements yesterday are a bit higher today.  Those who held the same rates all day yesterday are actually a hair lower on average.

Mortgage rates spiked at their fastest pace in months on Friday following the jobs report and yesterday added insult to injury, making for a total increase of nearly 3/8ths of a percent (.375%) in the average lender's top tier conventional 30yr fixed rate.   Moves of this size are rare, but less so when the market gets a big piece of surprising information after recently hitting a longer term high/low.  Those ingredients were in place this time around with prevailing rates close to the lowest levels in well over a year over the past few weeks and a shockingly strong jobs report.  The last similar example was in April of this year.  Instead of jobs data, it was an inflation report that did the damage back then, but there's still a lesson to be gleaned.  Simply put, it wasn't until the market received the next top tier economic report that rates began to move in the other direction.   In other words, while the worse may be over in terms of the rapid, upward movement, it will take new data to put compelling downward pressure on rates. Back in April the bond market was a bit more focused on inflation than jobs, but both were considered top tier reports.  At present, the market is much more focused on jobs, but inflation data could still have a moderate impact if it comes in far enough from forecasts.  The next CPI (consumer price index--the biggest market mover among inflation reports) comes in on Thursday morning.  

It's been a strange and frustrating couple of weeks for anyone who mistakenly believed that mortgage rates would move lower after the Fed rate cut.  To be sure, there is plenty of that sentiment out there according to the just released Fannie Mae sentiment survey showing the highest net percentage of respondents who thought rates would go down since the survey began in 2021. To be fair, the survey asks about a 12 month time frame and a lot can happen in 12 months.  As for the 3 weeks since the Fed rate cut, however, things have not been great.  Today's rate movement added insult to Friday's injury with the market still working through the momentum created by Friday's stronger jobs report. Given the motivations for the rate spike and the available economic data, it's unlikely that rates will move quickly back down to the levels seen in mid September.  They'd need a lot of downbeat economic data to do so.  Even then, traders would still be waiting to see what the next jobs report had to say before getting too carried away. Meanwhile, there's some risk of additional weakness in rates if the economic data is more resilient than expected.  The average lender is already back up to levels last seen in early August. Bottom line, markets got locked into the belief that data would slowly deteriorate (with a lot of weight being given to the last few jobs reports) only to see the most recent jobs report say "not so fast!"  There's a bit of a re-set happening at the moment.  We can't know exactly how big it will be until we get through more econ data.  Unfortunately, this week is much lighter than last week in that regard.