Mortgage Rates Index - JUN 11

Bumpy ride for mortgage rates the last 10-days. 🏡

​The LendZen Index tracks the change in mortgage rate prices across a spectrum of MBS.

​𝗨𝗻𝗹𝗶𝗸𝗲 𝘁𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗿𝗮𝘁𝗲 𝗶𝗻𝗱𝗶𝗰𝗲𝘀, 𝘁𝗵𝗲 𝗟𝗲𝗻𝗱𝗭𝗲𝗻 𝗜𝗻𝗱𝗲𝘅 𝗳𝗼𝗰𝘂𝘀𝗲𝘀 𝗼𝗻 𝘁𝗵𝗲 𝗽𝗿𝗶𝗰𝗲 𝗼𝗳 𝗺𝗼𝗿𝘁𝗴𝗮𝗴𝗲 𝗯𝗼𝗻𝗱𝘀.

​That is because in the USA mortgage rates do not rise or fall.

​Instead, the cost of each rate changes based on the daily fluctuation in the price of mortgage bonds (MBS).

​This approach offers borrowers a clearer understanding of how the cost to obtain a mortgage change daily, irrespective of the specific rate they are considering.

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The response to CPI inflation data today recovered half of the mortgage rate price increase since Friday's NFP report. 💰

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Zooming in closer on the 5-Day chart, we can see the cost of getting a mortgage decreased today by 18 bps, or $900 on a $500k loan.

Meanwhile, the shaded area chart below shows how the rate on U.S. Treasury Bonds moves inverse the price of MBS.

When the RATE of the 10-Year Treasury Bond is rising, the PRICE of mortgage bonds will be falling.

This reduces the liquidity (premium) available for lenders to offset the fees they charge, resulting in the cost of getting any mortgage rate to increase.

This emphasizes the point I make regularly about so-called “higher” mortgage rates:

“𝘐𝘵 𝘪𝘴 𝘯𝘰𝘵 𝘵𝘩𝘢𝘵 𝘭𝘰𝘸𝘦𝘳 𝘳𝘢𝘵𝘦𝘴 𝘢𝘳𝘦 𝘴𝘶𝘥𝘥𝘦𝘯𝘭𝘺 𝘶𝘯𝘢𝘷𝘢𝘪𝘭𝘢𝘣𝘭𝘦, 𝘪𝘵’𝘴 𝘵𝘩𝘢𝘵 𝘵𝘩𝘦 𝘤𝘰𝘴𝘵 𝘵𝘰 𝘨𝘦𝘵 𝘢 𝘭𝘰𝘢𝘯 𝘢𝘵 𝘵𝘩𝘰𝘴𝘦 𝘭𝘰𝘸𝘦𝘳 𝘳𝘢𝘵𝘦𝘴 𝘪𝘴 𝘯𝘰 𝘭𝘰𝘯𝘨𝘦𝘳 𝘦𝘤𝘰𝘯𝘰𝘮𝘪𝘤𝘢𝘭𝘭𝘺 𝘧𝘦𝘢𝘴𝘪𝘣𝘭𝘦 𝘧𝘰𝘳 𝘣𝘰𝘳𝘳𝘰𝘸𝘦𝘳𝘴 𝘵𝘰 𝘱𝘢𝘺. 𝘈𝘴 𝘢 𝘳𝘦𝘴𝘶𝘭𝘵, 𝘭𝘦𝘯𝘥𝘦𝘳𝘴 𝘳𝘦𝘧𝘳𝘢𝘪𝘯 𝘧𝘳𝘰𝘮 𝘱𝘳𝘰𝘮𝘰𝘵𝘪𝘯𝘨 𝘵𝘩𝘦𝘮.”

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