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Mortgage Rates Nominally Higher Despite Bond Market Warning

Mortgage rates  rose gently  today.  Most mortgage borrowers (and many mortgage professionals, for that matter) wouldn't be aware of slightly more alarming risks lurking underneath the surface.  Those risks involve the broader bond market from which mortgage-related bonds take their directional cues. 

More simply put, if US Treasuries are improving, mortgage-backed bonds tend to improve as well.  The level of correlation varies though.  For nearly all of 2018, mortgages weren't improving as quickly as the most widely-used rate benchmark: 10yr Treasury yields.  That began to change recently--especially when 10yr yields began moving higher 3 weeks ago.  During that time, we've seen moderate moves higher in 10yr yields met with modest moves higher in mortgage rates.  Today was another one of those days.

The underlying risk is that the moderate moves in Treasuries are adding up and potentially crossing dangerous lines.  Mortgage rates aren't any worse than they were at last week's highs, but Treasuries are as high as they've been in more than 3 weeks.  If they go much higher, they'll be breaking some important ceilings that investors might treat as harbingers of additional momentum.  The net effect would be additional increases in mortgage rates.  Even if those wouldn't be keeping pace with the weakness in Treasuries, they still wouldn't be pleasant.

Mortgage Rates Up Slightly, But Still in Great Shape

Mortgage rates  rose modestly  today after spending the past 2 days moving sideways.  It was really yesterday's market weakness that caused today's move.  Mortgage rates are most directly affected by the trading of mortgage-backed securities (MBS).  When MBS are weaker, rates rise.  MBS were weaker throughout the day yesterday, but not by quite enough for lenders to go to the trouble of revising their rate sheets for the worse.  Instead, lenders simply waited until this morning to make the changes implied by the market.  This delayed reaction is common when the market movement on any given day isn't quite enough to justify lender reprices.

In the bigger picture, rates have been in a holding pattern, possibly waiting for some indication that the government shutdown will end.  When such a thing happens, it likely presents a negative risk for rates--at least in the short term.  After that, it will take some time for the government's economic data to begin flowing again, and it will be that economic data that will ultimately have a bigger say with respect to interest rate momentum.

How are mortgage discount points calculated?

I know they are based on 1% of the loan. However, are the calculated on the base loan or with the closing costs rolled in? For example, your base loan is $320,000 with closing costs of $3,000 that you are rolling into the loan.


If you are using $320,000 toward the home, and rolling $3000 worth of closing costs into the loan, then your loan is $323,000.

All of these calculations are based on the loan value, which is $323,000.