Mortgage rates ended the previous week roughly in line with the best levels since May 1st.  Today’s modest improvement made it official.  Mortgage rates are primarily a function of trading levels in the bond market and bonds have had a few reasons to move at the start of the new week. There’s a small case to be made that U.S. involvement in the conflict between Israel and Iran contributed to bond market strength and, thus, lower mortgage rates today.  Less debatable is the fact that Fed Vice Chair Bowman commented on the possibility of cutting rates at the July meeting. This echoes sentiments shared by Fed’s Waller last week.  Unlike actual rate cuts (which often do little or nothing to help mortgage rates by the time they happen), changes in rate cut  expectations can impact longer-term rates in real time. In other words, by the time the Fed actually meets and cuts rates, the market has already had plenty of time to get in position for that due to comments from Fed speakers and economic data.

For many, business is slow out there, and the industry waits for the House vote on the abusive trigger lead bill. Depository banks continue to focus on residential lending in their own footprint while scaling back distant originations, and IMBs continue to look at staffing with a critical eye. A safe prediction is that this will continue, although people have grown more skeptical of others making predictions to grab headlines. A recession has yet to materialize, nor has a tidal wave of delinquencies and foreclosures. In fact, quite the opposite: The OCC Mortgage Metrics Report, First Quarter 2025 showed that 97.6 percent of mortgages included in the report were current and performing at the end of the quarter, an increase from 97.4 percent one year earlier. And The percentage of seriously delinquent mortgages decreased from the first quarter of 2024. MLOs motor forward and on today’s episode of Now Next Later at 10am PT, Sasha and Jeremy welcome Jake Vermillion, CMO at Mortgage Champions, to discuss the evolving role of mortgage loan officers and its impact on training and performance. (Today’s podcast can be found here and this week is sponsored by Optimal Blue. OB bridges the primary and secondary mortgage markets to deliver the industry’s only end-to-end capital markets platform, helping lenders maximize profitability and operate efficiently so they can help American borrowers achieve the dream of homeownership. Today’s has an interview with Argyle’s John Hardesty on what’s driving lender migration in the LOS and POS space, how tech stacks are being evaluated more strategically, why “conversion” matters more than ever in verification workflows, and what true interoperability means for mortgage fintech.)

A vast majority of long-time bond watchers share the same general understanding of how war impacts rates. Specifically, the increased global economic uncertainty drives safe-haven demand for US Treasuries, thus helping rates. While this CAN be true, it’s not a hard and fast rule. Consider the Russia/Ukraine example in which an initial drop in rates gave way to a paradoxical spike due to inflation implications. Keen observers anticipated a similar risk over the weekend with respect to oil prices. Alas! Not only have oil prices barely budged over the weekend, but bonds didn’t respond as expected when they initially spiked 2 weeks ago.

Over the weekend, there was initially no reaction whatsoever.  As the day gets underway, bonds are stronger–partially due to reports that there was no radioactive contamination after the attack and partially due to unrelated dovish comments from Fed’s Bowman.

Mortgage rates are expected to remain elevated but stable for longer, with some industry participants thinking it is good for the housing market.

Deputy Treasury Secretary Michael Faulkender says Basel capital rules need to fit the U.S. economy and avoid discouraging banks from lending.

Legislation passed in Connecticut protects homeowners from foreclosures tied to old liens that received renewed collections interest as housing values surged.

Lipkin, who built Valley National Bancorp from a small community bank into a regional institution with 200 branches in four states, passed away this week at age 84.

Median home prices rose by 1% to a record high, but sellers are taking lower offers as the market shifts towards the buyers’ favor.

Underwhelming (But Friendly) Conclusion

The present week didn’t manage to offer nearly as much excitement as the previous few examples, but that’s not necessarily a bad thing considering yields/rates are near the lower boundary of their recent ranges.  Today looked like it may have been a higher rate day at the start of the session, but bonds arrested the selling trend and reversed course after dovish comments from Fed’s Waller. Europe’s close was also beneficial for US bonds, helping us get all the way back into modestly stronger territory before trading levels flat-lined into the U.S. close. 

Econ Data / Events

Philly Fed Index 

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Leading Indicator Index

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Market Movement Recap

10:09 AM Moderately weaker overnight, following European bonds, but bouncing back a bit after AM data. MBS down 1 tick (.03) and 10yr up 2.7bps at 4.419

12:20 PM Decent rally at 11am. 10yr now down 1bp at 4.382.  MBS up 3 ticks (.09).

03:09 PM flat all afternoon.  10yr down 1.8bps at 4.374 and MBS up 5 ticks (.16). 

The latest Residential Construction report from the Census Bureau showed a noticeable drop in overall housing starts in May, though single-family activity managed a small gain. Building permits also declined, continuing a trend of slight cooling in new construction momentum. As usual, the market focuses most on building permits and housing starts , with the latter representing the beginning of actual construction activity. Total starts fell nearly 10% to an annual pace of 1.256 million , down from 1.392 million in April. The decline was almost entirely due to a sharp drop in multifamily starts , which fell from 420k to 316k , the lowest level in over a year. In contrast, single-family starts edged up slightly to 924k from 920k . Building permits—a forward-looking indicator—also declined, dropping 2% from 1.422 million to 1.393 million . That included a 2.7% decline in single-family permits and a moderate slowdown in multifamily authorizations.