Lots of headlines out there today about new record lows for Treasury yields (here’s why). But mortgage rates aren’t tied to Treasuries, they’re tied to mortgage bonds (aka MBS). Mortgage lenders watch MBS trading then price consumer rates accordingly—rates drop when MBS prices rise and vice versa.
When MBS have been trading higher (pushing rates down) for a sustained period then tick even higher, lenders often hold the line to see if a new rally holds or extends before passing along even lower rates to consumers.
My friend Matt Graham, MBS analyst at MortgageNewsDaily, discussed this theme today and here are my comments that are part of his write up.
Today is a lock day. This is the type of day that I’ve been discussing: the true rate lows come and go in minutes as Eurozone debt contagion drives global investors into (and out of) U.S. Treasuries and MBS. Not to say this kind of day won’t come again, but best to lock when it’s this low. CRITICAL POINT: Rates on conforming loans to $417k (and high limit conforming to $625,500 by county) are what move throughout each day as MBS trade. Jumbo loans don’t move with the markets in this manner because they’re not securitized in the same way (and are mostly not securitized at all), so jumbos are priced more by lenders than by MBS market forces. Jumbos are steady today, and could see slight improvement if a rally like this held for 3-5 days. And finally, if you are locking a loan right now, make sure you read the Refi Roadmap so you know what to expect.
Also there are comments from other loan officers on the ground around the country. Go check it out. Critical insight for consumers on how rate markets function.