Although there were flashes of potential volatility in the underlying bond market at times today, mortgage rates made it through unscathed.  In other words, the volatility wasn’t sufficient to force the average lender to make mid-day changes to the rates they decided to offer this morning. Whereas yesterday saw an inconsequentially small increase of 0.01% to the average conventional 30yr fixed rate, today saw just the opposite.  That means our rate index once again matches its lowest level since October 4th, 2024.  While this is undoubtedly a victory, rates would need to fall quite a bit more in order to hit the next milestone at the levels just one month earlier in early September (6.11% back then versus 6.57% today). An improvement like that would require multiple downbeat economic reports over the course of several weeks as well as lower-than-expected inflation readings.  Without that sort of data, there’s a risk that rates aren’t able to make much additional progress from here.

As the MMLA event wrapped up in Michigan, a large number of people around the nation (and some from here) are gearing up to travel to (or within) California to attend the California MBA’s Western Secondary and then FAMP’s annual convention in Orlando. The number of conferences is skyrocketing. Numbers are a big part of our industry, and this morning’s MBA application data reflected what I am hearing from MLOs around the nation. (Today’s L1 2PM ET interview features veteran broker Brian Benjamin discussing what he’s seeing.) Joel Kan writes, “The refinance share of mortgage activity increased to 41.5 percent of total applications from 40.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 8.5 percent of total applications.” Huh? Refis approaching 50 percent, and ARMs approaching 10 percent? Lenders are certainly focusing on helping clients with refinancing out of high interest rate credit card debt, and with the yield curve heading toward a more normal shape, 5-1 and 7-1 adjustable rate products are seeing renewed interest. (Today’s podcast can be found here and Sponsored by Total Expert, the purpose-built customer engagement platform trusted by hundreds of modern financial institutions. Total Expert turns customer data into actionable insights that help lenders engage and guide consumers through complex financial decisions. Hear an interview with borrower Riley Howard on his strategy for choosing a lender.) Products, Services, and Software for Lenders and Brokers

We don’t want to jinx it, but this is turning out to be an uncommonly calm week of trading compared to other post-jobs-report trading weeks.  So far, it’s on track to have the narrowest range and the lowest week-over-week change of any recent example, regardless of the size of the NFP reaction. There’s not much to say about the market in the absence of movement or relevant data.  Today’s only possibly noteworthy event is the 10yr Treasury auction, and that’s a stretch. If we really strain to assign meaning, we could draw some conclusions about underlying bond trading sentiment based on whether or not we see any sort of selling spree heading into the auction. If there is no pre-auction concession AND if the auction stats are respectable, it would say a lot about the market’s intention to hold or improve upon current levels.

Prior to the earnings release, Finance of America announced it was buying out Blackstone’s equity stake in the mortgage lender for $80 million.

Groups like the Mortgage Bankers Association and National Housing Conference welcomed the decision to increase the secondary market for the credits.

Americans now hold a record $34.5T in home equity, fueling a surge in home equity loans as lenders race to capitalize on rising property values.

President Trump in an interview Tuesday morning railed against big banks for allegedly discriminating against conservatives, a notable shift in tone that puts more responsibility for the debanking debacle on banks rather than regulators.

GSE loans acquired in the period have higher loan-to-value and debt-to-income ratios and lower credit scores, which Milliman said boosted serious default risk.

Bonds Hold Steady After Modest Data-Driven Rally

Today’s (and to be fair, this week’s) only major econ data–ISM Services–was a mixed blessing for bonds this morning.  The only headwind was the uptick in the inflation component to another post-pandemic high. The tailwinds involved all other components suggesting a mild economic deceleration.  Traders ultimately gave more weight to the latter. Bonds were slightly weaker before the data, but ended the day closer to unchanged levels.  MBS outperformed, presumably due to Treasuries facing down another week of heavy auction supply.

Econ Data / Events

Trade Gap (Jun)

-60.2B vs -61.6B f’cast, prev -71.5B

S&P Global Composite PMI (Jul)

55.1 vs 54.6 f’cast, prev 52.9

S&P Global Services PMI (Jul)

55.7 vs 55.2 f’cast, prev 52.9

ISM Biz Activity (Jul)

52.6, prev 54.2

ISM N-Mfg PMI (Jul)

50.1 vs 51.5 f’cast, prev 50.8

ISM Services Employment (Jul)

46.4, prev 47.2

ISM Services Prices (Jul)

69.9, prev 67.5

Market Movement Recap

10:06 AM Slightly weaker overnight and little-changed after ISM.  10yr up 2.2bps at 4.215.  MBS down 2 ticks (.06)

01:08 PM No major reaction to 3yr auction.  MBS down 1 tick (.03) and 10yr up 1.1bps at 4.204

03:35 PM Flat in the PM hours.  MBS unchanged and 10yr up 1bp at 4.202

Yesterday saw the average 30yr fixed rate fall back in line with levels from early October, 2024. This happened for two reasons. The broader, underlying reason is that rates have been in a fairly narrow, stable range and that range was already relatively closer to 10 month lows than 10 month highs. The more specific reason is quite clearly the market’s reaction to last week’s jobs report.  In other words, the prevailing range was the fuel and the jobs report was the match.  Little has changed so far in the present week as far as the underlying bond market is concerned. Mortgage rates happened to fall yesterday mostly because they weren’t able to fully adjust to bond market developments on Friday.  To a lesser degree, modest, additional improvement in the bond market left no doubt that lenders could drop rates just a bit more. Now today, bonds are even more ‘unchanged’ than yesterday.  Given that yesterday’s change was also modest, mortgage lenders didn’t have any catching up to do.  Thus, it’s no surprise to see the average lender effectively right in line with yesterday’s latest levels. Apart from yesterday (which is technically 0.01% higher), today’s rates are also the lowest in 10 months.