Last week was an above average week for new lock volume.  We had 111 new locks for $53M which was an average of 22 locks per day.  Our trailing 4 week daily lock average is up to 19 per day!  So far volume in September is down about 10% compared to the same time in August, but we still have 6 business days left to finish the month strong!  The Freddie Mac average 30 year fixed rate is at 6.09% as of last Thursday, and was down sharply by another 11 basis points from the prior week.  That puts the max APR this week for 30 year fixed rate loans at roughly 7.59% (6.09 + 1.50). The 10 year Treasury yield closed last week at 3.73%, up by about 8 basis points on the week.

Last week as expected the Fed began its new monetary easing cycle with a Fed Funds rate cut on Wednesday. What wasn’t expected was the size of the cut coming in at .50% (50 basis points). Leading up to the decision there was a lot of uncertainty around how big the cut would be, and the Fed decided to be aggressive and start the cycle with a large 50 basis point rate reduction. The FOMC recalibrated its policy to a focus on the softening labor market and ensuring a soft landing for the economy now that they believe that inflation is on the path toward their 2% goal. It was thought that the Fed would wait until inflation was down to 2% before cutting rates.  However, with recent weakness in the employment data, they decided that inflation currently at 2.4% and trending downward is close enough to the target to begin easing. Mortgage rates have declined by about 90 basis points since late July as the market had been pricing in the expectation for a rate cut in September. Because the cut was widely expected and priced into the market, there was very little market movement following the actual decision.

Lower interest rates across the board will help to sustain economic growth and avoid an economic downturn. Mortgage rates are down significantly since late July, but many homeowners are still locked into their homes at mortgage rates much lower than current rates. However, rates are firmly in a downward trend now and more reductions are expected. Currently Fed Funds futures markets are pricing in another 75 basis points of cuts this year at the two remaining Fed meetings in November and December.  Economists are predicting that the Fed will cut rates in total by 250 basis points over the next 12-18 months, and that was supported by the Fed’s latest dot plot forecast. We’ve turned the corner and are now entering a declining interest rate environment that we’ve been waiting for since 2022. 

This week the economic calendar is busy with many Fed speaking engagements and most importantly we’ll have the first fresh round of inflation data since the rate cut in the form of the PCE Index being released on Friday. So far today MBS prices are down slightly by 5-10 basis points compared to where they closed on Friday and the 10 year Treasury is up a few basis points compared to Friday’s close at 3.77%. 

Have a great week!