Mortgage Rates Are On a Tear!

Mortgage rates dropped significantly yet again today, adding to an already impressive week of improvement and bringing most lenders into their best territory since September 13th, 2018.  The average lender improved by more than an eighth of a percentage point in just the past 3 business days and by nearly 3/8ths of a point from the highs seen in early November.  This comes out to roughly $70/month for a $300k loan, or an upfront savings of $4500 if you were to buy your rate down (paying points) back in early November.

Much of the move has come courtesy of a rapid shift in expectations about the economy and Fed policy.  Investors have been worrying about the longevity of the current economic cycle more and more as it ages.  By some measures, this is already the longest economic expansion ever (and it should be, considering it follows the most profound recession in modern economic history).  The Fed has increasingly hinted at cracks emerging in the economy and the stock market just failed to break out of a rut it’s been in for nearly 2 months earlier this week.  

Bonds (the financial instruments that underlie interest rates, including mortgages) thrive on this sort of fear and uncertainty.  “Thriving” means more investors are buying bonds as a safer-haven investment, and more bond buying equates to lower rates.

Tomorrow brings significant risk in the form of the big jobs report.  This is one of the pieces of economic data that the Fed watches most closely.  Investors assume that the Fed’s upcoming policy changes could be directly affected by any big revelations in this report.  As such, if the numbers are much higher or lower than expected, rates could move quickly.

Article From: "Matthew Graham"   Read full article

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