Higher mortgage rates hindered application activity during the week ended February 9. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier although it did gain 2.0 percent on an unadjusted basis. The Refinance Index was 2,0 percent lower than the prior week and 12.0 percent higher than the same week one year ago. The refinancing share of mortgage applications made up 34.2 percent of the total, down from 35.4 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier and was 4.0 percent higher before adjustment. The number of applications declined by 12 percent year-over-year. [purchaseappschart] “Application activity was weaker last week, as mortgage rates moved higher across the board. The 30year fixed mortgage rate was up to 6.87 percent – the highest rate since early December 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory. Refinance applications declined and remained depressed, with rates still higher than a year ago .” Additional Data from MBA’s Weekly Mortgage Applications Survey 
The overall size of mortgage loans increased only slightly from the previous week to an average of $382,000 but the purchase mortgage amount jumped to $441,300 from $434,800.
The FHA share of applications increased to 13.4 percent from 13.1 percent and the VA share dipped 1 percentage point to 13.1 percent. The USDA share of total applications was unchanged at 0.4 percent.
The conforming mortgage interest rate of 6.87 percent was 7 basis points higher than the prior week and points increased to 0.65 from 0.59.
The average rate for jumbo 30-year fixed-rate mortgages (FRM) was 7.00 percent, up from 6.88 percent, with points decreasing to 0.39 from 0.47.
The 30-year FRM with FHA guarantees had a rate of 6.68 percent with 0.89 point. The prior week’s rates averaged 6.57 percent with 0.84 point.
The average for 15-year FRM jumped 12 basis points to 6.53 percent and points moved to 0.94 from 0.71.
The rate for 5/1 adjustable-rate mortgages (ARMs) rose to 6.30 percent from 6.14 percent, with points increasing to 0.6 from 0.48.
The ARM share of activity increased to 7.0 percent of total applications from 6.4 percent the prior week.

The transaction will make Guild the eighth largest non-bank lender in the country, the company said in its press release Tuesday.

One depository has now joined two nonbanks in publicly announcing they’re using the advanced score ahead of planned broader implementation by the agency market.

Dan Sogorka steps aside after four years, remaining as an advisor until he moves to a new opportunity.

The so-called core consumer price index, which excludes food and energy costs, increased 0.4% from December, more than expected and the most in eight months, according to government figures out Tuesday.

Over 60 former Draper & Kramer employees joined Synergy One at the beginning of February instead of New American Funding, which had acquired their company.

If it feels like there’s been an inordinate amount of focus on the Consumer Price Index (CPI) recently, today proved it was justified.  It’s not hard to understand WHY this data should matter.  After all, inflation is the biggest reason that rates moved higher at the pace seen in 2022/2023.  From there, we only need to know that CPI is the biggest market mover among inflation reports and the focus quickly makes sense. But that’s not the only reason that today was highly consequential.  We were also in the midst of a bit of a correction in rates that took us from the best levels in 8 months to the worst levels in more than a month in the space of 2 days.  In not so many words, the bond/rate market was essentially asking itself if it had been caught flat-footed heading into February.  The jobs report on Friday, Feb 2nd said “yes!”  Now today’s CPI data says “see?!” So what happened? It doesn’t sound too interesting at face value.  Core month-over-month inflation came in at 0.4% for January as opposed to the 0.3% seen last month.  Markets expected it to hold steady, on average.  Small monthly changes are very important when it comes to CPI–especially if those changes make a new argument about the momentum of inflation.   Today’s report was in a unique position to make it look like that momentum had been cooling since last September.  Instead, it now looks like it’s rising back toward levels from early 2023.

Unfortunately, Bonds Did Exactly What They Were Supposed to Do Today

Over the course of the past two weeks, and especially in the past few days, there’s been so much focus on today’s CPI release that it may have bordered on annoying.  A few things are more annoying, however.  Today’s example is a bond market that was incredibly eager to confirm that CPI deserved every bit of the recent hyper-focus.  By the time we consider that the big jobs numbers earlier in the month hit when yields were low enough to offer little argument to correction, today’s CPI reaction is larger and more significant by an order of magnitude.  The heretofore ceiling at 4.19% in 10yr yields was immediately shattered and we now find ourselves at the weakest levels in 2 months, resigned to wait on other economic data to tell a more rate-friendly story.

Market Movement Recap

08:24 AM moderately stronger overnight with all the gains arriving in Europe.  10yr down 2.7bps at 4.152.

08:40 AM Sharply weaker after CPI.  10yr up 10bps at 4.279.  MBS down roughly half a point. 

12:29 PM  5.5 coupons are currently down 5/8ths on the day.  6.0 coupons (quickly becoming more relevant for pricing) are down only 14 bps (.44). 10yr yields are up 10.4bps at 4.283

01:59 PM New lows with 6.0 coupons down half a point and 10yr yields up 11.4bps at 4.293.

It is a very straightforward morning for the bond market, but not in any sort of pleasant way.  There was a lot at stake heading into today’s inflation data and the results carried clear implications for bonds.  Sadly, the implications are not great.  Core monthly inflation came in at 0.4% versus a 0.3% forecast.  Year over year numbers stayed at 3.9% rather than falling to the 3.7% forecast (extra decimals in the underlying numbers explain why we can see a 0.2% miss in annual but only a 0.1% miss in monthly).  Bonds shot higher immediately and somewhat significantly–easily breaking the 4.19% ceiling in 10yr Treasury yields.   This only increases the burden of proof on downbeat economic data to hearken a turning point in inflation. With a strong jobs report in the rearview, we’re basically starting at square one.

In our biz, you never want to hear, “deception,” “targeting the elderly,” or “abusive tactics” related to a company. But there they are in this report, “The Ugly Truth Behind We Buy Ugly Houses.” (Thank you to Ken S. for passing this along.) The franchise is nationwide, unlike… cicadas? The U.S. Census Bureau says the Midwest includes 12 states: the Dakotas, Kansas, Missouri, Iowa, Nebraska, Illinois, Indiana, Minnesota, Wisconsin, Michigan, and Ohio. I mention this, not only because some people are confused where they live, but also because this spring, two different broods of cicadas, one that lives on a 13-year cycle and the other that lives on a 17-year cycle, will emerge at the same time from underground in a rare, synchronized event that last occurred in 1803. Billions of the winged insects will make an appearance across the Midwest and the Southeast, beginning in some places in late April, for a raucous mating ritual. (Today’s Commentary podcast can be found here and this week’s is sponsored by Lender Toolkit and its AI-powered AI Underwriter and Prism borrower income automation tools. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar, which means more repeat and referral business. Hear an interview between Lender Toolkit’s Madison Kelly and AMS LLC’s Andrew Hicks on AI underwriting.) Lender and Broker Software, Products, and Services Stay up to speed on what’s happening with borrower demand, incentive and other critical market trends by attending the ICE Mortgage Monitor webinar. You’ll gain insights you can’t get anywhere else. During this monthly webinar, ICE experts discuss the most current findings from their analysis of the company’s vast U.S. mortgage, housing and property data assets. Hear about home prices, affordability, interest rates, equity and other important factors that impact your lending strategies. Best of all, its free to attend: just sign up here. The next webinar will be held on Wednesday, Feb. 28, from 2-3PM ET.