Tuesday, October 09, 2018

Mortgage Rates Hold Above 5%

by Bill McBride on 10/09/2018 06:08:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Improve Slightly Today, But Risks Remain

Mortgage rates recovered a small portion of their recent losses today, but the average loan applicant might not even notice. The 2 key ingredients of a mortgage rate (for the purposes of tracking their movement) are the rate itself (the "note rate") and the upfront costs tied to that rate. The note rate and associated costs make up what many refer to as an "effective rate" (a number, expressed in interest rate form, that adjusts the actual note rate based on the implications of upfront cost changes.

It takes big market movement to change note rates, largely because lenders tend to offer rates in 0.125% increments. As such, bond yields such as 10yr Treasuries need to be moving by about that much in order to see a similar change in mortgage rates. That was the case last week as 10yr yields moved up nearly 0.25% in just a few days last week. The average mortgage lender also moved up 0.25% on 30yr fixed rate quotes.

If rates took the elevator up, they're taking the stairs down. Most borrowers will see a small adjustment toward lower upfront costs with the same interest rate they would have seen on Friday afternoon. [30YR FIXED - 5.0-5.125%]
emphasis added
Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, The Producer Price Index for September from the BLS. The consensus is a 0.2% increase in PPI, and a 0.2% increase in core PPI.