Weekly Mortgage Rate Update- 3-5-2025
Weekly Mortgage Rates
March 5, 2025
The strong improvement in mortgage rates for the past couple of weeks is now being digested with rates hovering near the best levels of the past 4 months, but feeling some pressure this morning as we await key jobs data on Friday.
Bonds get to sit at the popular kids table again
I hope I don’t lose anyone in this section because we have to get into the weeds a bit.
Mortgage rates are tied to the bond market. The 10-year Note has a significant impact on the direction mortgage rates take.
In 2022 bond traders were hurt badly when rates went up because they were holding much lower interest rate bonds. When rates go up the price (value) of the bond goes down.
Many have been questioning just how low rates can go with this pain point in bond traders’ recent memory. Just how willing will they be to accept lower returns in a highly inflationary environment when it’s possible rates can spike again?
Conversely, if you buy bonds when the rate is higher (like now) and rates come down, your bond holding value increases.
Right now, we are seeing a surge in demand for bonds. It seems investors are desperate to lock in rates in the 4’s before they decline.
Interesting to think about this dynamic when Trump is focused on getting the 10-year bond rate down. If Bond traders believe he will be successful, which it certainly seems like at this moment they do, more money moves to bonds to lock in the current rate. As a result, it becomes a self-fulfilling prophecy, and the bond rate will decline due to demand increasing.
Oh yeah, inflation
Yeah, it’s still hanging around. Last week the Fed’s main inflation measure came in pretty much as expected with core PCE at 2.6% annually. Progress has stalled and there are concerns that tariffs will cause it to flare up.
But for now, attention has turned to our economy slowing and tariffs are being viewed as causing a slowdown in growth, more concerning than inflation.
Just when they said there will be no recession
The outlook for the economy has shifted. Just a couple months ago we were marked safe from recession. Now, it appears we might be at the beginning of one.
The shift in sentiment about the economy is contributing to the continuing rout in stocks with some of that money moving to the bond market and therefore supporting the move lower in rates.
GDP forecast for the 1st quarter has been revised drastically lower. Original forecast +2.3% down to -1.5%, and then again just revised down to -2.8%. Yeah, that’s recessionary.
ISM Manufacturing fell in February. More concerning is that while production slowed, prices paid rose and employment weakened. Yeah, that is stagflation. This is something we will focus on in next week's update.
What's ahead
We have barely scratched the surface of all the things impacting rates this past week. Rate volatility has increased the past couple of days in rates signaling a possible pull back on the trend lower.
We are currently sitting at a new resistance level last hit at the beginning of December. At that time rates moved back up after a stronger jobs report. Well, we are right back there again in the same exact position.
Friday, we get the February jobs data. This morning ADP private payrolls came in much weaker than expectations. Will see if this weakness shows up in the official government data though, it hasn't always been reliable. If it does, we could see further improvement but if stronger employment in the reading, we might lose some of our footing here.
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