From 8% to Under 7.5%, Mortgage Rates Had a Near-Record Week
The average top tier 30yr fixed mortgage rate was over 8% as recently as October 19th. At the start of the present week, things weren’t much better at 7.92%. What a difference a few days make–especially the last 3. The improvement seen on Wed-Fri is the 3rd biggest in well over a decade. And if we throw out March 2020 (as we often do, due to unprecedented volatility relating to the onset of the pandemic), we’re left with only one other example back early November of 2022. So is this some kind of seasonal pattern? You’d be forgiven for drawing that conclusion, but in both cases, rates had recently surged to new long-term highs and then encountered surprisingly friendly economic data. Last November it was a low reading in the Consumer Price Index (CPI) that gave investors hope regarding a shift in inflation. Unfortunately, that shift proved to be a head-fake and rates continued lower into February of 2023, it’s been up, up, and away since then. This time around, scheduled data gets the credit again, but there’s a more robust assortment. The good times began to roll on Wednesday after Treasury announced lower-than-expected auction amounts (lower supply of bonds relative to expectations means lower rates, all other things being equal). The rally gained momentum with economic data at 10am and again with the Fed announcement in the afternoon. Thursday was mild by comparison, but kept the trajectory intact with help from slightly higher Jobless Claims data, and especially from traders exiting bets on higher rates. In the bond market, the simple act of “no longer betting on higher rates” forces a trader to effectively enter a bet on lower rates.