Mortgage rates moved modestly lower for the average lender today, but higher for others. The distinction is whether the lender in question made a late-day adjustment yesterday afternoon.  At the time, the underlying market for mortgage bonds was improving somewhat sharply. This prompted several lenders to drop rates before the end of business. Those lenders had to bump rates back up this morning as the bond market was in weaker territory this morning.  Other lenders–those who didn’t make any changes yesterday afternoon–were able to nudge rates modestly lower today as this morning’s bond market levels were a bit better than yesterday morning’s.  In the bigger picture, the average lender is still very close to 3-year lows. [thirtyyearmortgagerates]

While rumors swirl that Jerome Powell is paying his own legal bills while dealing with the DOJ, and the Administration is ruminating on using 401(k) or 529 funds to buy a home, in the land of “concrete news” the office-to-apartment and condo conversion trend is accelerating, with the number of units repurposed from office buildings more than tripling since 2022 and the conversion pipeline expanding by 28 percent between 2024 and 2025. Do you have the loan products for them? The total pipeline has now reached 70,700 units, with major metros like New York (8,310 units), Washington, D.C. (6,533 units), and Los Angeles (4,388 units) leading the way. Notably, office-to-apartment projects account for large shares of projects in places like Omaha (85 percent), Dallas (79 percent), and Minneapolis (78 percent). There is a growing shift toward repurposing newer office spaces built between the 1990s and 2010s. Office conversions now make up 42 percent of all future adaptive reuse apartments, up from 38 percent in 2024, and nearly 15 percent of office buildings nationwide are deemed viable for transformation. (Today’s podcast can be found here and this week’s are sponsored by Figure. Take advantage of Figure’s technology and products like its fixed HELOC, DSCR loan, piggyback loan, and direct debt paydown, helping you serve more of your existing network and expand into new markets. Hear an interview with Worthy Performance Group’s Laura Lasher on why many lenders will fail to capitalize on a rate-driven rebound, what truly differentiates winning loan officers, how competitive dynamics have shifted toward larger institutions, which training investments genuinely improve performance, and the warning signs that signal an organization is unprepared for the next market cycle.)

The weekly jobless claims data (not to be confused with the big monthly jobs report) is hit and miss when it comes to its propensity to move the bond market. On occasions where the results fall far from the forecast, we tend to see moderate reactions. Odds increase when the headline breaks under the psychological level of 200k.  With that, today’s 198k print is having a bit of a negative impact on bonds at 8:30am, taking the market from roughly unchanged overnight levels into slightly weaker territory. A stronger Philly Fed index offered no solace.

AI can accelerate onboarding by providing recruits with real-time feedback, support compliance by flagging documentation issues, and close the confidence gap by offering reliable answers on the spot writes the CEO of Friday Harbor

The San Francisco-based banking giant reported solid gains in credit card and auto lending as credit remained in check and quarterly operating costs declined from a year ago.

The latest Lower acquisition comes after several previous mergers with lenders as well as two last year that incorporated technology and real estate platforms.

The megabank’s net income declined by 13% during the fourth quarter as a result of a $1.2 billion pretax loss on sale related to the divestiture of its remaining operations in Russia.

The contract rate on a 30-year mortgage dropped 7 basis points to 6.18% in the week ended Jan. 9, according to Mortgage Bankers Association data released Wednesday.

Some Asymmetric Risk When it Comes to Locking vs Floating

Bonds improved today mostly in response to heavy stock losses creating some safe haven buying demand. Data wasn’t heavily traded, but it didn’t do any harm. Producer Prices were mixed, with an upward revision in September being offset by lower-than-expected inflation in November. Retail Sales (also November data) beat at the headline, but the control group (excludes autos/gas/building materials) was in line with estimates and October’s number was revised lower. Despite the bond gains, mortgage rates were unchanged. This offers a potential clue about lenders being resistant to the notion of offering meaningful improvements from current levels in the short term.

Econ Data / Events

Core Producer Prices MM (Nov)

0.0% vs 0.2% f’cast

Core Producer Prices MM (Oct)

0.3% vs 0.1% prev

PPI YoY (Nov)

3% vs 2.7% f’cast

PPI YoY (Oct)

2.8% vs 2.7% prev

Producer Prices (Nov)

0.2% vs 0.2% f’cast, 0.1% prev

Producer Prices (Oct)

0.1% vs 0.3% prev

Retail Sales (Nov)

0.6% vs 0.4% f’cast, 0% prev

Retail Sales Control Group MoM (Nov)

0.4% vs 0.4% f’cast, 0.8% prev

Market Movement Recap

09:11 AM No major reaction to AM econ data. MBS up 1 tick (.03) and 10yr down 1.6bps at 4.165

11:23 AM Best levels of the day with MBS up 5 ticks (.16) and 10yr down 4.2bps at 4.138

01:58 PM Little changed from last update. MBS up 5 ticks (.16) and 10yr down 4.7bps at 4.133

Trading levels in the bond market directly impact the rates that mortgage lenders can offer. This is why rates moved so much lower after last week’s news regarding planned purchases of $200bln in mortgage backed bonds.  But bonds aren’t the only input for rates, and those other inputs can make for days like today where bonds are noticeably better while mortgage rates refuse to follow. Those other inputs aren’t as easy to observe and quantify as the objective trading levels in the bond market, but in the current case, we can assume that at least some of the explanation has to do with mortgage lenders quickly becoming too busy to handle more volume. “Busy” isn’t necessarily the right word, but in this case, it’s a catch-all term for the side effects of rapidly originating a much higher volume of new loans. One aspect has to do with the flow of funding. Lenders don’t have unlimited cash to accept new lock commitments.  As they approach those limits, they will raise rates (or not lower them as much as their peers) to deter new business. A slightly more esoteric aspect has to do with deterring borrowers who recently acquired new mortgages from refinancing. Early payoffs (which mostly occur via refinancing when rates unexpectedly fall) cost lenders money because, on average, lenders pay more than the principal amount to originate a loan.  They then rely on earning interest to offset that expense. An early payoff means they won’t be able to collect that interest. As such, they have an incentive to avoid setting rates at low enough levels to entice recently minted mortgages from refi’ing.