Mortgage markets worsened last week, moving U.S. mortgage rates higher on the whole.
Like prior weeks, market action was sharp. Rates climbed 0.25 percentage points Wednesday afternoon, which shocked thousands of unprepared mortgage rate shoppers. Markets made small improvements over the remainder of the week, but couldn’t undo the damage.
Mortgage rates have been volatile since last quarter. So, what can buyers and refinancing households expect to see this week. What will mortgage rates do next?
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Freddie Mac : 30-Year Fixed Rate At 4.22%
According to government-backed Freddie Mac, last week, the average 30-year fixed rate mortgage rate slipped 13 basis points to 4.22% nationwide; with the rate available to prime borrowers willing to pay 0.7 discount points at closing.
0.7 discount points carries a cost equal to 0.7% of your loan size.
A borrower in Boston, Massachusetts, therefore, whose loan size is equal to the local Freddie Mac mortgage loan limit of $417,000 would pay $2,919 at closing in order to lock a 4.22% mortgage rate. A borrower in Orange County, California with a loan size at the local limit of $625,500 would pay $4,379.
Borrowers opting out of discount points will pay slightly higher rates.
Freddie Mac reported rates for 15-year fixed rate mortgages lower, too. The group’s survey of more than 100 mortgage lenders showed the average 15-year fixed rate mortgage rate down eight basis points to 3.27% nationwide.
Like its 30-year counterpart, the 15-year rate requires 0.7 points to be paid at closing.
There is now a 0.95 percentage point difference between the published rates of a 30-year and 15-year fixed rate mortgage — among the largest spreads in recorded mortgage history. Borrowers using a 15-year mortgage now pay close to 70% less to own their own home than via a 30-year loan.
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What Freddie Mac’s Survey Failed To Include
Freddie Mac’s weekly mortgage rate survey published Thursday. It showed mortgage rates down 0.13 percentage points from the week prior. However, for buyers shopping for loans last week, the reality of the market was something different entirely.
Yes, mortgage rates were improved last week — but only during a portion of the last week.
Beginning Wednesday afternoon, with the release of the October Fed Minutes, mortgage markets cratered. Mortgage pricing worsened by an entire discount point in a span of just four hours.
After the Fed Minutes hit the wires, the 30-year fixed mortgage rate Freddie Mac said would cost 0.7 discount points suddenly jumped to 1.7 discount points. Fees more than doubled to $7,089 on loans of $417,000; and to $10,634 on loans of $625,500.
Alternatively, mortgage rates rose 0.25 percentage points — the latest in a series of big moves for U.S. mortgage rates. Volatility is the new normal and shoppers in search of the lowest available mortgage rates are finding it harder to find what they want.
Mortgage rates are changing faster than during any period since last decade, at least.
Already this year, there have been 14 weeks in which mortgage rates changed by more than 0.10 percentage points from the week prior, and this week — because of the Fed Minutes — will make fifteen.
That’s as many weeks as during the last 3 years combined :
- 2010 : 7 weeks of ±10 basis point change in mortgage rates
- 2011 : 6 weeks of ±10 basis point change in mortgage rates
- 2012 : 2 weeks of ±10 basis point change in mortgage rates
- 2013 : 15 weeks of ±10 basis point change in mortgage rates
Even in 2009, the year during which the economy and U.S. housing suffered; the Eurozone faced sovereign debt issues; and, confidence among consumers dropped, mortgage rates only moved ±10 basis points twelve separate times.
These are historic times. For today’s home buyers and refinancing households, it’s truly a “You snooze, you lose” situation. Lock your mortgage rate now, or risk a massive change.
Get today's live rates before they change
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What’s Changing Mortgage Rates Today?
This week, mortgage rates are expected to remain volatile. In addition to a stocked economic releases calendar, the week will be shortened because of Thanksgiving.
With markets closed Thursday and only light volume expected Wednesday and Friday, bond trading will be more erratic than typical as market liquidity shrinks.
Here’s what ahead :
- Monday : Pending Home Sales Index; Dallas Fed Manufacturing Survey
- Tuesday : Housing Starts; FHFA Home Price Index; Case-Shiller Index; Richmond Fed Manufacturing Index; 5-Year Treasury Note Auction
- Wednesday : Jobless Claims; Consumer Sentiment; 7-Year Treasury Note Auction
- Thursday : Markets closed for Thanksgiving
- Friday : Early-close for weekend
Note the Treasury auctions slated for Tuesday and Wednesday. Strong demand for U.S. Treasuries often spills over into the mortgage-backed securities (MBS) market, which is good for everyday mortgage rates.
When Treasury auctions go well, mortgage rates tend to drop for conforming mortgages; and for FHA, VA and USDA loans, too. When auction demand is low, by contrast, mortgage rates often rise.
Rate shoppers can avoid unnecessary market risk by locking a rate now. Waiting through Thanksgiving may result in higher rates.
Get Today’s Live Mortgage Rates Now
For today’s home buyers and refinancing households, mortgage rates are changing too fast to keep shopping simple. Unlike last year, when rates moved gradually lower, this year’s rates are moving more quickly. Waiting for rates to fall is a weak financial strategy — especially when rates can rise 0.25 percentage points in an afternoon.
Get a personalized mortgage rate quote and see what the market can give you today. Because, by tomorrow, the market will likely look much different.
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