Mortgage rates are driven by the bond market and bonds consistently take cues from economic data.  Traders have been waiting on this Thursday's economic data ever since last Thursday, largely because there haven't been any major reports between now and then. The market constantly tries to adjust based on whatever it thinks it can know ahead of time.  That means that the median forecast among hundreds of economists for any given report tends to be reflected in the bond market well before the report in question is released.  Then on release day, the market reacts to deviations from the consensus. In today's case, all 3 of this morning's key reports were stronger than expected.   Jobless Claims dropped to 241k for the week.  Both last week's level and this week's forecasts were 260k. The Philly Fed Business Outlook Survey came in at 10.3 versus a median forecast of 3.0 and a previous reading of 1.7. Retail Sales rose 0.4% vs a 0.3% forecast and 0.1% in the last report. Immediately following the release of the data (all 3 hit at 8:30am ET), the bond market lost ground.  That means bond prices fell and yields (aka "rates") rose.  Mortgage lenders then base their rates for the day on the trading levels in the bond market.  Unsurprisingly, that meant the average lender moved back near their highest recent levels for a top tier conventional 30yr fixed scenario. The silver lining is that rates are still technically in the same range seen over the past week and a half, but that range is quite a bit higher than September's.  

Mortgage rates have been holding in a fairly narrow range since the middle of last week and today was one of the least interesting additions to the trend.  The average lender is essentially unchanged versus yesterday, up a mere 0.01%, but down 0.02% from last Friday. Mortgage rates are primarily a function of trading levels in the bond market.  Bonds respond to a variety of motivations, but the biggest risks and opportunities are tied to major economic reports. With that in mind, it's no surprise to see a general lack of movement recently as last week's only major economic data was inconclusive.  Tomorrow morning brings the first potentially significant data of the week with several reports being released at 8:30am ET with Retail Sales being the headliner.  This is well before most any mortgage lender updates its rate offerings for the day.  There's never a guarantee that economic data will move the needle.  All we can know is that potential volatility is higher.  The data would have to come in much higher or lower than forecast in order to cause a big move in rates. Even then, Retail Sales and tomorrow's other reports are not in the same league as the mighty jobs report that sent rates screaming higher 2 weeks ago. 

The average mortgage lender is quoting rates that are just a fraction of a hair lower today compared to last Friday.  Lenders were either closed or otherwise not able to update rates yesterday due to the Federal holiday.  Anything other than "higher" is a victory recently.  Rate jumped at the 2nd fastest pace of the year after the jobs report that was released on Friday, October 4th, and continued moving higher through last Wednesday.  They've calmed down since then, but they haven't made any meaningful progress back toward the lower levels seen a few weeks ago. Context matters.  In the short term, it would be easy to lament the fact that rates are up about 0.50% in about a month.  But if we merely look back to early April, rates are still down the better part of 1 percent. In year over year terms, the improvement is about 1.4%.  That's a very solid pace under any circumstances, but especially in the absence of the onset of a recession. Today was uneventful in terms of bond market movement and intraday rate changes from mortgage lenders.  Bigger swings will likely depend on bigger economic reports and there are only a few heavy hitters on the calendar each month. This week's only notable contender is the Retail Sales report on Thursday morning at 8:30am ET.  This doesn't mean rates can't move at all between now and then--simply that Retail Sales has the best chance to inspire bigger movement.

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.