Mortgage rates moved lower at a decent pace today for the 2nd day in a row. The average lender is still offering the same “note rate” compared to yesterday, but the costs associated with that rate are lower. In other words, “effective rates” (a synthetic rate that accounts for changes in upfront costs, thus allowing us to observe smaller day-to-day changes in the form of an interest rate) are lower.
Why distinguish between effective rates and note rates? Simply put, note rates don’t tend to move enough to be worth tracking each day (most lenders offer rates in 0.125% increments). During more stable market conditions, we can go weeks or even months at a time without a change in note rates. Effective rates, however, are almost always higher or lower by at least 0.01%.
So where does this leave us and where do we go from here?
There’s good news and bad news on that front. The good news is that today’s rates are the lowest in about a week. The bad news is that, at the time, those were the highest rates in about a year, and still significantly higher than the lows seen at the beginning of this year (0.5% in many cases).
As to whether or not this is the start of a bigger reversal, that remains to be seen. We’ve had several such promising episodes on the path toward higher rates and all of them have been “traps” so far. Eventually, one of these bounces will be the real deal (and indeed, it gets more likely the higher rates go), but we’ll wait for at least a few more days of confirmation before getting too attached to the idea.