Mortgage Rate Watch

More than a few media outlets will tell you that 30yr fixed mortgage rates are just now moving over 7% based on the fact that Freddie Mac's weekly rate survey hit 7.03%, up from 6.95% last week.  Before continuing, let's be clear that Freddie's weekly rates are a valuable resource for long-term, big picture analysis. But the survey is not an ideal tool to keep track of where rates are on any given day. There are a few reasons for this, but the easiest to understand is that today's update from Freddie is calculated from an average of rates seen between last Wednesday and yesterday. In other words, it hasn't even measured what rates did today, not to mention the fact that the number is artificially dragged down by lower rates earlier on in the 5-day cycle. In daily terms, 7% was first broken back on September 10th following inflation reports that raised the risk of the Fed rate hike seen last week. A combination of Fed comments, higher oil prices, and stronger economic data have added to the pain since then. As of yesterday, our daily rate index was already up to 7.26%. Today, it's up to 7.45%. [thirtyyearmortgagerates] It is still definitely possible for a mortgage NOTE RATE to be quoted in the high 6% range today, but 7.45% is the rate that captures an apples to apples comparison to all of the past daily rate index entries we've published over the years. A rate that's near or under 7% would require additional upfront points/costs/buydown relative to the average rate quote methodology. Our index automatically takes points/buydown into account in order to capture the true change in rates over time.

The day began like many others over the past several weeks. Bonds hadn't moved much overnight, but were paying some attention to slightly higher oil prices. 10yr Treasury yields were still in the familiar September range between 4.93% and 5.01%, and there was limited economic data on tap that threatened to upset the apple cart. Now let's talk about tail risk. It refers to a distribution of potential outcomes for something that can be reasonably forecasted with a margin of error. A vast majority of the outcomes fall in the main body of the parabolic distribution, but occasionally, an outcome will fall at one of the tails.  While this week's economic calendar is indeed very light, today's lineup included a report that can have a big impact on rates on very rare occasions. The results of that report were so much stronger than expected as to constitute "tail risk" territory.  This is a particularly bad time for such tail risk as far as the rate market is concerned. Only yesterday, we had Fed speakers reminding us that if the economy proved to be hotter than expected, the rate hike outlook shared at least week's Fed announcement would be "too low." Today's data immediately forced the market to consider the risk that next week's data (which is much more important) conveys a similarly strong message.  The result was a rapid shift in Fed rate expectations for next year. While longer term rates don't react to a Fed rate hike after the fact, they're more than willing to react to changes in rate hike expectations. 10yr Treasury yields jumped over 5.1% and the average top-tier 30yr fixed rate jumped 0.09% to 7.26%. This matches the high seen in early 2025. At this point, we'd have to go back to May 1, 2024 to see anything higher. 

Mortgage rates didn't move much on Tuesday, but at least it was in the right direction. Perhaps more exciting is the fact that the average lender is now at the lowest levels in a week with top-tier 30yr fixed rates at 7.17% versus 7.19% yesterday. This matches September 14th's rates. Before that, you'd have to go back to January, 2025 to see anything higher.  Motivation came from familiar sources as oil prices moved lower after overnight headlines regarding a potential reopening of the Strait of Hormuz. There was a bit of a pull-back intraday but oil and bond yields moved back down in the afternoon following another round of promising war-related headlines.  [thirtyyearmortgagerates]

It was a fairly uneventful day for mortgage rates to start the new week. The underlying bond market was slightly stronger. This suggests slightly lower interest rates. The average mortgage lender lowered top-tier 30yr fixed rates by 0.01% compared to Friday.  Underlying motivation for the bond market can mostly be attributed to lower oil prices, which have been a common source of intraday inspiration for better or worse. With today's drop, the average lender remains right in line with the rates they offered before last week's Fed rate hike.  [thirtyyearmortgagerates]

We'd be the first to remind you that mortgage rates are primarily determined by trading levels in the bond market--specifically those for mortgage-backed securities (MBS). That said, there are days where rates don't do exactly what MBS suggest. Today was one of them. According to the bond market, mortgage rates should have been much higher than they were yesterday. As it stands, the average lender was just barely higher.  The discrepancy comes down to the volatility experienced earlier in the week. Lenders have some latitude when it comes to setting mortgage rates. If the underlying market is moving rapidly, lenders may make bigger or smaller adjustments depending on the direction of the move.  In this week's case, yesterday's bond market improvement suggested a sharper drop in rates than we actually saw. In other words, lenders were playing it slightly safer than they needed to. That turned out to have been a good decision, and it meant that they weren't forced to chase the bond market into weaker territory today. The bottom line is that today's rates were technically only 0.01% higher than yesterday's on average, and also right in line with the rates seen on Wednesday morning before the Fed announcement. 

We love it when a plan comes together. Heading into yesterday's Fed announcement, the hope was that a rate hike would reassure investors in longer-term bonds (like those that underlie mortgage rates). We also didn't expect that benefit to necessarily play out on the day of the hike itself (it didn't).  In fact, Fed day threw rates a bit of a curveball--not because the Fed hiked, but rather, due to the implications for additional hikes in Fed Chair Warsh's press conference. Thankfully, as of today, Warsh's unexpected hawkishness proved to be a temporary inconvenience for the market and rates are now back to the lowest levels of the past 4 days (and very close to the lowest levels of the week seen on Monday).  There's no guarantee about where we'll go from here, but common themes remain important. These include big ticket economic data and oil price volatility relating to Iran war developments. After hitting 7.24% yesterday, the average top-tier 30yr fixed rate is back down to 7.19%. 

Mortgage rates are definitely higher today--the highest since January 13th, 2025. Today's Fed announcement had something to do with that. But while the Fed hiked the Fed Funds Rate, that had NOTHING to do with mortgage rates moving higher this afternoon. In fact, this is very easy see on a chart of bond market movement. We can use 10yr Treasuries as a more active proxy for the bonds that underlie mortgage rate movement. The Fed hike was not only almost 100% priced into financial markets, but it had no major impact on bonds when it was announced at 2pm. It wasn't until 2:30pm--when Fed Chair Warsh's press conference began--that rates started having a bad day. A Federal Reserve that's committed to fighting inflation is ultimately a good thing for interest rates in the longer term. The market clearly agreed that it was even a good thing in the short term at first. But when it saw just how committed Warsh was during the press conference, traders adjusted fairly quickly.  Why? Warsh had to option to use the press conference to characterize today's rate hike as some sort of "close call" made out of "abundance of caution" over the inflation outlook. Instead, he said the economy was strong, inflation hadn't made any real progress recently, and that the Fed needed to "remove some accommodation" from the economy. That last part suggests the Fed views current rates as accommodative (i.e. they promote higher prices and economic growth, all else equal). 

Mortgage rates moved higher for the 6th day in a row on Tuesday and to the highest levels since January, 2025. The average top-tier 30yr fixed rate is up to 7.22% and the most prevalently-quoted top-tier rate is 7.25%. Over the past 6 days, the average is up 0.33%, which is is the most abrupt jump since October 2024. At least some of the recent volatility is due to the implications of recent economic data and oil price implications on Fed policy. Tomorrow brings the next regularly-scheduled Fed announcement. Markets are heavily betting that the Fed hikes rates at this meeting.  Despite the expectations, not all experts agree that a hike is a foregone conclusion. As such, no matter what the Fed does, there's a higher risk of a volatile response in rates.  Volatility can go both ways, of course. The Fed Funds Rate applies to a different part of the rate continuum than mortgage rates. Even in the past 6 weeks, we've seen several examples of Fed Funds Rate expectations move in the opposite direction from longer-term rates like mortgages.  All that to say, a Fed rate hike tomorrow--in and of itself--does not necessarily mean higher mortgage rates. In fact, some would argue that an absence of a Fed rate hike could be the worse outcome for longer-term rates. Speculation aside, there is more to a Fed announcement than a mere "cut/hold/hike" decision, and markets will take all of it into consideration before committing to a big reaction.  [thirtyyearmortgagerates]

On average, the top-tier 30yr fixed mortgage rate moved up to another new long-term high today of 7.17%. You'd have to go back to January, 2025 to see anything higher. That said, there's more variability than normal today depending on the lender.  Bonds (which dictate rates) were at their weakest levels of the day right around the time most lenders publish mortgage rates for the first time (9:30-10:30am ET). Bonds improved after that following headlines that helped oil prices fall back to the lows of the day. A solid handful of lenders issued updates to mortgage rates, bringing them much closer to Friday's latest levels.  The implication is that other lenders would be able to offer lower rates tomorrow morning assuming there are no major changes in the bond market overnight. Please note, there is absolutely no way to know if bonds will hold their ground from one day to the next. The best takeaway is to assume that there's a small amount of cushion among lenders who did not offer afternoon price improvements.  [thirtyyearmortgagerates]

Looked at in a vacuum, and up until the last few hours of the day, Friday was no better or worse than the average day over the past several months. Compared to yesterday morning's levels, the average lender was 0.01% higher--a small enough move to be effectively considered "unchanged."  This expanded to 0.05% in the last few hours as multiple lenders increased rates. In terms of big-picture benchmarks, the increase officially brings rates to their highest levels since early 2025. To be clear, we were just barely lower than May 2025 levels yesterday. Now we're in line February 2025 levels. The intraday market movement was interesting. The bond market (which underlies mortgage rate movement) actually improved this morning even though Fed rate hike expectations increased following a slightly hotter inflation reading in this morning's economic data. This is an uncommon pattern. There are two ways to look at it. First, longer-term rates may have been encouraged by the uptick in Fed rate hike expectations because that provided reassurance that Fed was more likely to take steps to combat higher inflation. In other words, some of the upward pressure in longer-term rates is thought to have been driven by fear of Fed inaction. If this morning's inflation data was hot enough to increase the odds of action, but not so hot as to cause a material change in the inflation outlook, it's the perfectly warm bowl of porridge. In OTHER other words, yes! There's a scenario where longer-term rates (things like mortgages and 5-10yr Treasury yields) actually WANT the shortest-term rates (like the Fed Funds Rate) to move higher.