Mortgage Charges Decrease In the present day, However Volatility Stays a Threat
Mortgage rates fell today after starting the week by rising noticeably yesterday. Today’s gains are due to global growth concerns at the start of the trading session and a strong 10-year Treasury auction during the domestic market hours. This morning’s mortgage rates weren’t much better than yesterday, but several lenders offered improvements after the treasury auction at noon. Lenders who stood firm would likely improve tomorrow morning unless the overnight market drama wiped out today’s profits.
Why are treasury auctions important to mortgage rates? Government bonds and MBS (mortgage-backed securities – the bonds that most directly affect mortgage rates) are both part of the bond market. They correlate reasonably well for a number of reasons (not least because Treasuries are the risk-free starting point by which any dollar-denominated bond investment is measured). When Treasuries is having a good day, MBS (and therefore mortgage rates) usually have at least one decent day. Today was no exception.
After all of the above, we are talking about very small movements in the overall picture. The average lender is still reporting the same rates as yesterday, but with modest improvements in up-front costs (i.e., lower lender fees or higher lender loans all other things being equal).
Tomorrow brings several important developments with the release of a regular monetary policy update from the European Central Bank (ECB). Just as Treasury considerations can spill over into the mortgage world, so can global central bank considerations (affecting the European bond market) spill over into the US bond market. Domestic hours bring one final treasury auction for the week at 1 p.m. ET.