Good morning.  10yr yields are in the 1.2's.  All-time lows. We follow MBS and the 10yr Treasury yield (and other rates, when relevant) here.  The focus is on the 10yr for THESE REASONS. Today will be "interesting" then, because mortgage rates aren't going to do what the 10yr is suggesting.  I've broken this down before in excruciating detail HERE.  <---- That's the definitive link on this topic, but I'm going to break it down in different, mostly smaller words. When you get a mortgage, a lender writes a check on your behalf in exchange for you agreeing to pay them back over time.  Why would the lender do that?  Because they're counting on you paying back more than you borrowed. That's simple right?  If they loaned you $250k to buy a house, and you make at least one payment, they'll get their $250k back plus whatever interest you paid in the first month.  Shouldn't they be happy? No, not at all.  They'd actually be pretty pissed off.  Your new loan is a thing of value that can generate money for an investor.  As such, they're willing to pay more than the principle amount of the loan for the right to collect interest.  So your $250k loan may have cost $260k to purchase/fund.  If you're familiar with the concept of lender-paid closing costs, that's where that money comes from.  Bottom line, in the above scenario, the lender needs to collect $10k in interest before they break even. If the lender were buying US Treasuries, they wouldn't have to worry about the US government deciding to pay the loan back too quickly.  Treasuries don't even have that option.  They also don't have as much interest-earning potential for investors.  The mortgage investor is taking more risk for more reward.  The risk is that you pay your loan off too quickly  and they don't make money on interest. When rates fall super duper fast, those risks increase quickly.  The investors who buy mortgages know this, so those premiums begin to decline.  $260k becomes $258k, etc.   What we're dealing with here are the building blocks of lending.  Whether we're talking about a Treasury bond or a mortgage, both are loans.  Both have a price for the investor/lender and a rate of return.  Price and rate are the two key inputs that decide the cost of any given loan.  A higher price paid by the investor is the same thing as the investor accepting a lower rate of return and vice versa. So when we talk about "premiums beginning to decline," we're talking about investors paying LOWER prices for any given rate of return.  And as the previous paragraph discussed, when an investor is paying a lower price, it's the same thing as you paying a higher rate.  In short: super fast drop in rates = investors worried you'll refinance too soon for them to break even = investors pay less of a premium for your loan so they can break even sooner, and lower prices = higher rates for you. If you've been reading this and think your head is about to explode due to a logic bomb you think I missed, don't worry... I didn't miss it.  I realize what I wrote above could be reduced to the assertion that "rapidly falling rates = higher rates."  Here's how that works: Just throw the word "relatively" in front of "higher rates."  For the investor who buys loans/bonds (whether it be mortgages or Treasuries), everything is relative.  When the rates are falling across the board (i.e. Treasury yields of all kinds declining in concert with mortgage rates), it means investors are paying higher prices for those loans across the board.  The refi risk scenario discussed above means the investor isn't increasing their price offering for mortgages in proportion to the price increases for something like US Treasuries (which, again, don't carry that "refi risk").   Looked at another way, if the overall "rate of return" for the bond/loan investor is declining, the simple act of keeping mortgage rates 'unchanged' is the same as raising mortgage rates when the overall rate of return in the bond/loan market is holding steady.  It's all relative. BOTTOM bottom line: the mortgage investor has to worry about you paying your loan off too quickly, so it's not at all uncommon to see mortgage rates get stuck in the mud even as Treasury yields surge to all-time lows.  Given enough time and market stability, mortgage rates eventually follow, but without enough time, sometimes they'll just wait here and reconnect with Treasuries when rates head back up.  

February 27, 2020 Download our Mobile App: Download our Mobile App: 30 Yr. Fixed 6.28% -0.01%   6.11% 7.26% 15 Yr. Fixed 5.65% +0.05%   5.54% 6.59% 30 Yr. Jumbo 6.25% +0.00%   6.25% 7.45% Compare Mortgage Rates from Local Lenders for Feb 27, 2020 Mortgage Rates Are Low, But They're Not Falling as Fast as The 10yr Tue, Feb 25, 2020 4:56PM Mortgage rates have been putting on a rather frustrating and exciting show in the month of February. On the one hand, they're at their lowest levels since 2012 and are off to their strongest start of any year on record. On the other hand, they're not nearly as low as you'd expect them to be based on movement elsewhere in the interest rate world. In fact, even on a day like today where the mighty 10yr Treasury yield (something that a lot of people mistakenly view as the basis for mortgage rates) precipitously fell to new all-time lows, many mortgage lenders were offering the same rates as yeste... (read more) Mortgage News Daily Rate Change Points 30 Yr. Fixed 6.28% -0.01 0.00 15 Yr. Fixed 5.65% +0.05 0.00 30 Yr. FHA 5.94% -0.01 0.00 30 Yr. Jumbo 6.25% 0.00 0.00 7/6 SOFR ARM 5.62% +0.03 0.00 30 Yr. VA 5.95% -0.02 0.00 Updates Daily - Last Update: 9/8 Freddie Mac Rate Change Points 30 Yr. Fixed 6.50% -0.06 0.00 15 Yr. Fixed 5.60% -0.09 0.00 Updates Weekly - Last Update: 9/4 Mortgage Bankers Assoc. 30 Yr. Fixed 6.64% -0.05 0.59 15 Yr. Fixed 5.84% -0.19 0.84 30 Yr. Jumbo 6.58% -0.09 0.39 Updates Weekly - Last Update: 9/3 UMBS 30YR 5.5 101.28 +0.16   97.47 101.61 UMBS 30YR 6.0 102.54 +0.05   99.66 102.54 10 YR Treasury 4.039 -0.047   3.621 4.780 MBS Live Day Ahead: Don't Expect Mortgage Rates to be Thrilled Thu, Feb 27, 2020 9:09AM Good morning.  10yr yields are in the 1.2's.  All-time lows. We follow MBS and the 10yr Treasury yield (and other rates, when relevant) here.  The focus is on the 10yr for THESE REASONS. Today will be "interesting" then, because mortgage rates aren't going to do what the 10yr is suggesting.  I've broken this down before in excruciatin... (read more) MBS Price Change UMBS 5.0 99.78 +0.31 UMBS 5.5 101.28 +0.16 UMBS 6.0 102.54 +0.05 GNMA 5.0 100.07 +0.24 GNMA 5.5 101.19 +0.06 GNMA 6.0 102.18 +0.05 Pricing as of: 9/8 6:22PM EST US Treasury Yield Change 2 YR Treasury 3.487 -0.030 5 YR Treasury 3.562 -0.027 7 YR Treasury 3.768 -0.032 10 YR Treasury 4.039 -0.047 30 YR Treasury 4.690 -0.079 Pricing as of: 9/8 6:22PM EST Other News Home Sales Crushed Expectations And Are Now Near a 2 Year High Thu, Feb 27, 2020 10:19AM Pending home sales bounced back last month after an unexpectedly dismal performance ended the prior year. The National Association of Realtors ® said its Pending Home Sales Index (PHSI), which had dropped 4.9 percent to 103.2 in December, posted a 5.2 percent increase last month to a reading of 108.8. This is 5.7 percent higher than the Index in January ... (read more) New Home Sales Hit Highest Levels Since 2007 Wed, Feb 26, 2020 11:12AM New home sales had ended 2019 in a much stronger fashion than they had started the year. December sales were at an annual rate of 708,000 (a revision from the initial estimate of 694,000) and running more than 23 percent above sales a year earlier. With Wednesday's sales report from the U.S. Census Bureau and the Department of Housing and Urban Development i... (read more) Mortgage Applications Calm Before The Storm? Wed, Feb 26, 2020 8:25AM There was a new round of interest rate cuts during the week ended February 21, but consumers largely ignored the additional potential for refinancing. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage volume, increased by 1.5 percent from the previous week on an unadjusted basis, but was down 7 percent on an unadju... (read more) LO Jobs; Pooling, Non-QM, Appraisal Products; CFPB, Audit, Exams, and Compliance News Thu, Feb 27, 2020 8:57AM I was telling my cat Myrtle that U.S. lenders are continuing to bask in the glow of a great 2019 and a start to 2020 (with March and April now looking very good, given rates), but that one of the big worries is about branches and referral partners being picked off, either through acquisitions or by competitors. She seemed disinterested. But she is particular... (read more) Latest Video CA Governor Newsom: We are working with CDC to expand testing Fed's Evans: Premature to give coronavirus guidance without more data Market getting ahead of itself, is dependent on Fed: Fisher Pending home sales jump 5.2% in January, vs. 2% expected Around the Web Reuters Wall Street on record correction pace as pandemic fears loom Reuters Thousands in California being monitored for coronavirus: governor Reuters Fed seen slashing rates amid virus threat, low inflation Reuters Fed's Evans: too early to cut growth outlook or rates on coronavirus Reuters Exclusive: U.S. mulls using sweeping powers to ramp up production of coronavirus protective gear CNBC California is monitoring 8,400 people for the coronavirus CNBC Ex-Fed official Richard Fisher warns against Fed-to-the-rescue every time there's a crisis Calculated Risk Blog Kansas City Fed: "Tenth District Manufacturing Activity Increased Modestly" in February NAHB Eye on Housing Multifamily Builder and Developer Confidence Unchanged in Fourth Quarter Calculated Risk Blog Q4 GDP Unchanged at 2.1% Annual Rate CNBC US weekly jobless claims rise more than expected CNBC US orders for durable goods slip 0.2% in January CNBC Goldman sees zero earnings growth for US companies this year because of coronavirus

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