A fake image of Brad Pitt was used to scam a woman out of $850,000. (Hopefully every lender has set up policies and procedures regarding events like the CFO receiving an email from the CEO asking to blindly wire money for a “secret acquisition.”) Remember when you could buy a great house for $850k? Although Los Angeles will be under great strain for years, in many areas you still can buy a house for that, but home builders are reporting a rise in cancellations due to increased mortgage rates, which surpassed 7 percent for the first time in seven months. While builder confidence in the market for newly built single-family homes improved slightly in January, concerns about inflation, tariffs on building materials, and government deficits persist. The National Association of Home Builders forecasts modest growth in housing starts for 2025, but the ongoing impact of high mortgage rates is leading some builders to cut home prices, with 30 percent offering average discounts of 5 percent. (Today’s podcast can be found here and this week’s is sponsored by Lender Toolkit's new Prism. Experience a quantum leap in accuracy and efficiency as you streamline workflows, reduce errors, and close loans faster. Prism's advanced OCR boasts 99 percent accuracy across 1,450+ document types. Effortlessly index, analyze, and underwrite crucial data with their intelligent system. Today’s has an interview with Lender Toolkit’s Joe Sorbello and VanDyk Mortgage’s Lindsey Kuhnle on how companies can properly onboard and implement new tech offerings.)
Bonds Calmly Hold Overnight Gains
This morning's commentary focused on a bond rally in response to an absence of heavy-handed specificity in Trump's initial salvo of executive orders--specifically with respect to trade policy. In not so many words, massive, immediate tariffs have been referred to agencies for research and comment. Bonds (via futures) rallied on the news yesterday and into the overnight session. Without any new sources of inspiration today, the overnight gains remained intact and volatility was generally absent.
Market Movement Recap
09:52 AM Moderately stronger overnight with implied gains on Monday in Treasury futures. MBS up 6 ticks (.19) and 10yr down roughly 5bps at 4.577
01:32 PM Roughly an eighth of a point below best levels. MBS still up 6 ticks (.19) and 10yr down 5bps at 4.577
03:43 PM Calmly holding gains. MBS up a quarter point and 10yr down 6.2bps at 4.564
Mortgage rates are driven predominantly by the bond market and bonds were able to clear up a few curiosities on inauguration day. Specifically, traders expected multiple executive orders with several focusing on proposed tariffs. While history suggests the conventional wisdom may be faulty, the general belief is that tariffs increase inflation. Considering inflation correlates with higher rates, there was some relief in rates when the executive orders concerning tariffs turned out to be less aggressive than expected. In not so many words, the president ordered various agencies to asses trade agreements/deficits and recommend measures to address them, such as tariffs. Bonds were thus able to hold onto the gains from last week with some additional improvement today. The average mortgage lender wasn't eager to adjust rates, however, with the top tier 30yr fixed rate remaining unchanged from last Friday.
Please don’t touch my pizza! In a decision that has left countless fans disappointed,, including many in the mortgage ranks, Costco has decided to remove the $1.25 fries option from the food court menu entirely. The decision comes at a time when the retailer identified certain items as being “loss leaders,” which include the $5 rotisserie chicken, the $1.50 hot dog and soda combo (which we hope never goes anywhere) and now, the fries. On top of that, Costco workers have voted to strike, and they’re serious. At the other end of the economic spectrum, the Trumps have launched their own cryptocurrencies… I’ve lost track of the billions added to their net worth. (Freddie and Fannie accept virtual currencies under certain circumstances.) On the regulatory front, attorney Brian Levy seems to have rethought his criticism of DOGE’s lack of seriousness. After a barrage of CFPB action in the presumed final days of Rohit Chopra’s tenure, Levy muses on the prospects for reform under new CFPB leadership in his latest Mortgage Musings. (Sign up here for a free subscription.) (Today’s podcast can be found here and this week’s is sponsored by Lender Toolkit's new Prism. Experience a quantum leap in accuracy and efficiency as you streamline workflows, reduce errors, and close loans faster. Prism's advanced OCR boasts 99 percent accuracy across 1,450+ document types. Effortlessly index, analyze, and underwrite crucial data with their intelligent system. Today’s has an interview with EquityProtect’s Jon Dovidio on industry solutions to deed theft and title fraud.)
Trump issued numerous executive orders on Monday, but conspicuously absent was any specific directive regarding tariffs. This was one of the key areas of focus for financial markets. While there are few different ways it could be traded, one of the simplest was from an inflation standpoint. With specifics TBD, bonds breathed a modest sigh of relief on inflation implications. There was an immediate reaction at 8:30am yesterday (in futures) following WSJ's reporting on the tariff delay. There's been some volatility in the interim, but bonds have managed to improve a bit more since then.
Watching Rates
Check our some recent articles and posts about current rates.
Mortgage rates are driven predominantly by the bond market and bonds were able to clear up a few curiosities on inauguration day. Specifically, traders expected multiple executive orders with several focusing on proposed tariffs. While history suggests the conventional wisdom may be faulty, the general belief is that tariffs increase inflation. Considering inflation correlates with higher rates, there was some relief in rates when the executive orders concerning tariffs turned out to be less aggressive than expected. In not so many words, the president ordered various agencies to asses trade agreements/deficits and recommend measures to address them, such as tariffs. Bonds were thus able to hold onto the gains from last week with some additional improvement today. The average mortgage lender wasn't eager to adjust rates, however, with the top tier 30yr fixed rate remaining unchanged from last Friday.
Mortgage rates are driven by the bond market and Friday was the least active day of the week for bonds. There were no major economic reports to cause rapid changes in trading levels. As such, mortgage rates started out very close to the levels seen yesterday and most lenders didn't make any mid-day changes. The absence of any significant movement is a victory, of sorts, in light of the ground covered over the past 2 days (the best 2-day improvement since November). On the other hand, rates began the week at the highest levels since May 2024. It's more common to see bigger gains when rates are recovering from long term highs--a fact that detracts from the victory to some extent. Bonds are closed on Monday for the holiday and Tuesday could see a flurry of market activity in response to political news. There's no way to know if that activity would be good or bad for rates ahead of time, let alone if it will even materialize in the first place. [thirtyyearmortgagerates]
After having a great day yesterday, mortgage rates were able to add another "good" day today. The net effect brings the average lender's top tier 30yr fixed rate back down to levels last seen on January 2nd, exactly 2 weeks ago. Yesterday's key motivation was the palatable inflation data in the Consumer Price Index (CPI). Today's economic data wasn't nearly as pertinent to the outcome although a slightly softer reading on Retail Sales didn't hurt this morning. Rather, it was comments from a member of the Federal Reserve (Waller) and the Treasury Secretary nominee (Bessent). Waller said he sees inflation continuing to fall into line along with the possibility of more Fed rate cuts in the first half of the year. Rates didn't have a huge reaction to that, but it was a friendly one nonetheless. Bessent fielded questions during his confirmation hearing and bond markets were pleased to hear his level of austerity with respect to government spending--something that contributes to higher rates indirectly, but significantly.
We knew that today's Consumer Price Index (CPI) was a hotly anticipated economic report that at least had the potential to give rates a big push, and it didn't disappoint. Any time we're dealing with an important economic report that gives rates a big push, there's generally an equal chance of getting pushed in either direction. We can know this with confidence because rates are based on financial markets and traders wouldn't wait to make their move if they already knew what that move would look like. All that having been said, there are occasionally situations where these pushes end up being more likely to be bigger in one direction vs the other. Today could be argued to be benefiting from such a phenomenon simply because rates were at the highest levels in 8 months over the past few days. Some of the biggest single day rate drops we've seen have followed a similar formula (i.e. rates at long term highs followed by an obviously rate-friendly economic report). The past examples of this have only tended to involve 2 economic reports: the jobs report (which hurt us last week) and the Consumer Price Index (CPI), which helped us today. Long story short, the relevant components of the CPI data were lower than the market expected. Bonds improved immediately and lenders were able to move rates back down to the levels seen earlier last week. Granted, the levels seen earlier last week were still the highest in many months at the time, but any move back toward lower rates has to start somewhere. We won't know how long this one will last until we see the extent to which additional economic data supports the same conclusion.
