Summary:
The bond market recently weakened, leading to a slight increase in mortgage rates despite media reports suggesting otherwise. Freddie Mac’s weekly rate survey, which averages rates over five days, often lags behind daily rate tracking, causing discrepancies in reporting. Today’s modest rate hike is attributed to trader adjustments rather than specific economic data. Next week’s Fed announcement, including the “dot plot,” will be crucial in shaping future mortgage rate expectations.
What This Means for You:
- Monitor daily rate changes: Relying solely on weekly surveys like Freddie Mac’s can lead to outdated information. Use daily rate tracking tools for real-time updates.
- Expect Fed-induced volatility: While the Fed’s rate cut is already priced in, other data releases could cause significant rate fluctuations.
- Lock in rates strategically: With rates hovering near October 2024 lows, consider locking in rates sooner rather than later to avoid potential increases.
- Stay informed on economic indicators: Labor market data and inflation trends will heavily influence future rate decisions.
Original Post:
The underlying bond market (which dictates the rates offered by mortgage lenders) weakened moderately overnight. Weaker bonds equate to higher rates, all else equal.
“Higher rates” is contrary to many media outlets’ coverage this week, but there’s an important reason. Most news organizations that cover mortgage rates rely on Freddie Mac’s weekly rate survey for their once-a-week update. Additionally, when Freddie’s rate raises/falls appreciably, it receives even more attention.
This frequently creates problems due to the timing and methodology of Freddie’s survey. Specifically, the survey is an AVERAGE of the rates seen over the 5 days (Thu-Wed) leading up to Freddie’s Thursday release. As such, if rates happen to fall sharply on a Friday (as was the case last week), our DAILY rate tracking will reflect that on Friday while Freddie won’t catch up until the following Thursday (yesterday, in this case). By that time, rates hadn’t moved any lower, and now today, they’re actually a bit higher.
All that to say, the rate drop you’re hearing about from Freddie is the same rate drop we told you about last Friday. There’s been no meaningful improvement since then, and in fact, a modest increase in rates today.
Today’s move in bonds/rates wasn’t driven by anything specific and shifts of this size don’t demand concrete justification in underlying data or events. It could simply be the case that traders were closing out trading positions for the week and the modest uptick in yields/rates was the incidental result.
Mortgage-specific bonds were even less volatile today, resulting in a mere 0.02% increase in the average 30yr fixed mortgage rate. That brings our index back up to 6.29%, which is in line with this week’s other highs and still part of a very narrow range that represents the lowest general levels since October 2024.
Next week brings a much-anticipated Fed announcement. The Fed is virtually 100% likely to cut the Fed Funds Rate by 0.25%. This near-certainty is already baked into today’s mortgage rates and the Fed rate cut will have zero impact on mortgage rates in and of itself. Rather, other data release in conjunction with the rate cut could still cause volatility.
The Fed’s “dot plot” (a summary of each Fed member’s view of the appropriate Fed Funds Rate at various future dates) is of primary importance. The dots help markets gauge the potential path of additional rate cuts in 2025 and beyond. It is a vital tool in calibrating the evolution of the Fed’s rate-friendliness as a function of recent economic data. In simpler terms, it will show us how much more willing the Fed is to cut rates in light of recently downbeat labor market data and still-elevated inflation.
Extra Information:
For deeper insights on mortgage rate trends, explore Mortgage News Daily. Additionally, understanding the Federal Reserve’s monetary policy calendar can help anticipate rate changes. Lastly, learn how inflation impacts mortgage rates through Investopedia’s detailed guide.
People Also Ask About:
- What causes mortgage rates to rise? Mortgage rates rise when bond yields increase, often due to economic strength or inflation concerns.
- How often do mortgage rates change? Mortgage rates can change daily based on market conditions and economic data.
- What is the Fed “dot plot”? The dot plot is a visual representation of Federal Reserve members’ expectations for future interest rates.
- Should I lock my mortgage rate now? If rates are near recent lows, locking in can protect against potential increases.
Expert Opinion:
The current mortgage rate environment underscores the importance of staying agile in a volatile market. While the Fed’s rate cut appears certain, the real focus should be on accompanying economic data and the “dot plot,” which will provide critical clues about the trajectory of future rate cuts and their impact on mortgage affordability.
Key Terms:
- Mortgage rate trends 2024
- Federal Reserve dot plot explained
- Impact of bond market on mortgage rates
- When to lock in mortgage rates
- Freddie Mac weekly rate survey methodology
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