It’s been an eerily quiet week or so for mortgage rates.
It’s almost too quiet, as if you think there’s something lurking around the corner.
After a very volatile March (when they went up a lot) and most of April (when they recovered surprisingly), they did nothing.
It makes you wonder what’s next and what the catalyst might be, if anything.
Real Estate Rates Have Flattened Strangely Recently
It’s been a more or less uneventful week for mortgage rates after experiencing significant volatility for two straight months.
They jumped from levels below 6% in early March to around 6.625%.
It then recovered to about 6.30% in the month of April, which is not bad considering the war in the Middle East is still very much in the equation.
And oil remains above $100 per barrel, if not higher. But since then they have done very little, as evidenced above in the MND daily rate index.
The latest development in that regard is the UAE leaving OPEC, which is a sign that the Strait of Hormuz issue is unlikely to be resolved soon.
So countries are taking it upon themselves, and in the case of the UAE, it has been an opportunity to be free and play by their own rules.
But it could also mean tensions in the region and greater uncertainty in energy markets going forward.
That could eventually mean increased production and lower prices, but the more unknowns of the political landscape in the region now feel less stable.
Next Friday’s Jobs Report Is the Biggie
The situation in the Middle East will continue to be a wildcard, although the 10-year bond yield did not do much for about a month.
It seems to be a wait-and-see approach, which would explain why the 30-year correction just fell due to tight spreads.
But that could change next Friday, May 8, when we get the jobs report for April.
The Fed is more focused on jobs than inflation and with Powell set to lead his final meeting as Fed chairman this week, it could be a key data point for incoming chairman Kevin Warsh.
Everyone expects Warsh to be more dovish and push for rate cuts and if he gets a soft jobs report, it gives him a strong argument to cut faster.
If that jobs report heats up, he’ll have a tough time convincing his fellow Fed members to resume cutting.
So the jobs report arguably comes at an important time for the changing of the guard, with Warsh expected to take over in mid-May.
The Fed does not set loan rates, but relies on economic data and if it is weak, bond yields will respond to expectations of a Fed rate cut.
If you are fighting for low mortgage rates, you will want a cold jobs report with few jobs created and high unemployment.
Yes, that’s ironic, but it’s the only way to lower mortgage rates now without a big positive development in the Middle East.
Lock or Float Mortgage Rates Right Now?
I mentioned the lock in comparison. and the loan rate float for another week and basically my position hasn’t changed much.
The rates given are still very low if we reverse the picture, just over 6.25% for 30 years fixed, it is difficult to see a tone of low power.
Keep in mind that the sub-6% rate was the best we’ve seen in 3.5 years, just before mortgage rates double from 3% to 6% in early 2022.
So they’ve made a lot of progress since then, especially since we had rates of almost 8% by the end of 2023.
And with oil at $110 a barrel and a lot of unknowns about the Middle East, one could argue that prices almost .25% higher than this decline aren’t too bad.
Sure, they can improve further, but how much? Another .125%? It would be hard to imagine them going back to sub-6% in the current situation.
I continue to think that we are lucky that they are so low as they are considered all things.
Conversely, if things turn sour they could retest recent levels of 6.50% to 6.75% or higher, especially since mortgage rates are historically high in the spring!
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on X for the hottest.
