This Past Week:
Interest rates improved to their best levels since mid-December. Let’s dive into what happened and get ready for the week ahead.
I’m pickin’ up good vibrations, she’s giving me excitations (oom bop bop)…Good Vibrations by The Beach Boys.
Treasury Secretary Scott Bessent:
In his first interview as Treasury Secretary, Scott Bessent stressed his focus on lowering the 10-year Note yield rather than the Fed Funds Rate. Since the 10-year Note has a direct impact on 30-year mortgage rates, his approach is key for our market. He highlighted the importance of lowering inflation and expanding energy supply, saying, “For hard-working people, the energy component is one of the surest indicators for long-term inflation expectations. If we can get gasoline and heating oil prices down, consumers will save money and rebuild optimism.” He added that with lower energy prices, tax-cut extensions, and deregulation, rates will eventually take care of themselves. This reminds us that mortgage rates are driven more by the broader economy and fiscal policy than by the Fed alone.
Lower Yields Abroad Equals Lower Rates in the U.S.:
Our rates also benefited from strong bond auctions in the UK. Their government bonds (Gilts) saw tremendous buying, which helped lower yields globally. When yields hit attractive levels for investors, it puts downward pressure on rates here at home.
Oil Slides Lower:
Since January 15th, oil prices have dropped from just over $80 a barrel to around $71. Lower oil prices tend to reduce inflation expectations, which in turn can help lower the 10-year Note yield and, ultimately, mortgage rates.
30-Year Mortgage Rates & 10-Year Note:
As of February 6, 2025, the 30-year fixed mortgage rate averaged 6.89%, down from 6.95% the previous week, though still higher than last year’s 6.64%. Meanwhile, the 10-year Note yield has eased from its 2024 highs above 4.80% to below 4.50%. If it holds there for a few days, that could serve as a ceiling and might even see it drop further toward 4.20%.
Bottom Line:
We’re seeing rates pull back, and if the 10-year Note stays under 4.50%, there’s potential for further declines toward 4.20%.
Looking Ahead:
Next week will be crucial with key inflation data on the horizon. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) are coming out soon—the CPI will likely have a bigger market impact as it reflects consumer inflation, while the PPI will give us an early look at future inflation trends. Also, keep an eye on the Treasury as they sell $125 billion in new debt.
Let’s keep our eyes on these developments and be ready to adjust our strategies as needed.
Mortgage Market Guide Candlestick Chart
Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.
If you look at the right side of the chart, you can see how prices have climbed higher and standing at the best levels since mid-December, meaning the lowest mortgage rates since that time.
Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, February 7, 2025)
Economic Calendar for the Week of February 10 – 14
