Mortgage rates stare down precipice of despair after big July reversal
Mortgage Rate Price Tracker
TABLE OF CONTENTS
RATE RECAP ⏪
--------------
July brought a painful resurgence of geopolitical uncertainty as bond markets reacted to the inflationary potential of ongoing tensions in the Strait of Hormuz.
Economic data was largely in line with expectations, perhaps helping put a lid on an otherwise ugly month for bond prices and mortgage rate pricing.
The end result was a swift dismissal of peace deal optimism and a return to precarious levels last tested in March, with the price of lower rates nearly doubling since then.
We have stood at this same precipice of despair several times in recent years and managed to recover each time.
The exception was 2023 – what followed then was a total bloodbath and the worst mortgage rates in more than two decades.
PRICE TRACKER 🔭
------------------
Most mortgages are sold into mortgage-backed securities (MBS) and the price of these bonds determines rates for all banks and lenders.
However, mortgage rates DO NOT rise or fall. Instead, the price of each rate changes while the rates available to you remain the same.
The Mortgage Rate Price Tracker (MRPT) illustrates this dynamic by showing how the price of each rate changed within the time series.
Some higher rates pay a rebate; this is illustrated on the tracker with negative (-) points.
When the “total change” in the table is negative it means a reduction in the price of the rate.
The MRPT is a “rate and loan program” specific example of the LendZen Index, which monitors a much broader set of rates and mortgage bond coupons.
Both are effective for visualizing how the PRICE of mortgage rates has changed, while the LendZen Index is published daily at LendZen.Substack.com
CONVENTIONAL 30-YEAR 📉
------------------------------
CONVENTIONAL 15-YEAR 📉
------------------------------
VA 30-YEAR 📉
--------------
MBS EXPLAINED 📖
-------------------
How much a mortgage-backed security is priced below or above par (100-00) determines the “price” of the mortgage rates packaged into that MBS coupon.
For example, the higher an MBS is priced above par, the less expensive the rates will be that are sold into that security.
(ex. 102-00 > 101-00)
The Note rates of each mortgage sold into a specific MBS typically range between 0.250 – 0.625 above the coupon rate, depending on the loan type.
(ex. 6.250% – 6.625% rates ~ 6.00 MBS)
The spread between the mortgage Note rate and the coupon rate is retained as a servicing fee.
(ex. 0.250 – 0.625)
This is why a 6.00 note rate is not sold into a 6.00 coupon and is therefore priced based on lower coupons.
(ex. 6.00% rate ~ 5.50 MBS)
As a result, the shift between different coupons can disproportionality affect the PRICE of the lower Note rate despite the close proximity of the two rates.
(ex. X.00% rate vs X.25% rate)
Thanks for reading…
If you want to shop real-time mortgage rates and get instant qualification results without providing any contact information visit LendZen.com
The below snapshot is just a glimpse of today’s rates, but the pricing you see is exactly what you get - there are no additional lender fees or origination charges.
LendZen Inc. is an equal opportunity mortgage lender, NMLS 375788