Mortgage Rates Fell After the Midterms, but a Lender Expects More Swings

Mortgage rates kept falling after the midterm elections. Freddie Mac said Thursday that the 30-year fixed rate averaged 7.18% this week, down from 7.24% last week. It is the third weekly drop in a row. Two weeks ago the average was 7.32%.

Democrats won both houses of Congress and many statewide races in former Republican strongholds. A few races were still being counted on Thursday. Treasury yields fell in the two days after the vote, and mortgage rates follow those yields. Many investors moved money out of tech stocks and into bonds, which pushed yields down.

Not everyone expected that. "I was actually really surprised because this morning I thought that I'd see a spike in Treasury yields," said Glen Weinberg, chief operating officer and partner at Fairview Commercial Lending, who has worked in lending for almost 30 years. "Both parties are the spending parties." He expects the new Congress to raise the debt ceiling and spend more, which he says will push rates higher over time.

His main point is speed. "I've never seen the markets moving the way they are," Weinberg told Mortgage Professional America. He expects rates to trend higher overall, with short windows of lower rates along the way. "They could be minutes, they could be hours, they could be days, they could be weeks," he said. Fairview's calls were about 30% above normal the day after the election, with no change in its advertising.

Lenders feel the swings too. Weinberg said lenders that hedge their loans face a hard market, because locking the wrong way can turn a good loan into a big loss. He expects more mergers as a result, with "the bigger" getting bigger. Rate and Compass announced a merger on Wednesday.

The rate drop comes as the market slows. Last week's reports showed home prices rose in August but fell behind inflation, and pending home sales hit a record low in September.

For agents, the point is to be ready before the next dip. Buyers who are fully approved, with documents already with the lender, can lock the same day rates fall. Ask your lender partners how fast they can lock and whether they offer a float-down. Sellers should know that a few weeks of lower rates can bring more buyers out, so a well-priced listing may see more showings. The interview was first reported by Mortgage Professional America.