by        Matthew Graham

Mortgage Rates Edge Back Down to 6-Week Lows

Jan 17 2014, 5:44PM

Mortgage rates moved lower for the second day in a row, bringing them back to the same 6-week lows seen on Monday, on average.  Some lenders were in slightly better or worse shape compared to Monday, but any discrepancies would only be noticeable in the form of closing costs.  That means 4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios   (best-execution).  When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.03% today, the same as yesterday’s move.

We’re now in relatively uncharted waters as far as the last 8 months are concerned.  Over that time, rates have moved almost exclusively higher.  The periodic corrections tended to be short-lived and to follow huge moves higher–i.e. true “corrections”–the kind you see only because markets don’t move in one direction all the time.  The only exception was in September (and to a lesser extent, October, but that was unique due to the government shutdown).

September is easier to relate to.  Rates had just hit longer-term highs.  Fed policy and employment data were center-stage.  And bond markets spent more than just a few short days holding their ground and improving (when bond markets improve, rates fall).  Almost all of that improvement back then was due to a major event (Fed holding off on tapering), and the same is true now (last week’s Jobs Report).

Unlike last time, we don’t have an impending government shutdown to help drive safe-haven demand for the bonds that would help keep rates low.  That doesn’t mean we’re doomed, but it does leave us more vulnerable to events–particularly the FOMC Announcement the week after next.

In the meantime, there’s a distinct possibility that your quoted scenario could  improve next week.  There’s also a possibility you’ll never see today’s  rate again.  We have conflicting truths informing the present in that the long-term trend has been exclusively higher, but that the past week is also clearly a pocket of recovery, at least somewhat similar to September.  There’s no way to know how long this pocket of recovery will last, but until the longer term uptrend is clearly over, it makes sense to view this correction as having a limited number of days.  We just used 6 of them.