Mortgage rates have improved meaningfully over the past month. Mortgage News Daily’s 30-year benchmark fell from 7.61% in early October to 7.17% Thursday. Today’s strong jobs report created some pressure, but so far the bond market has held up better than you might expect.

And remember: the rates you see online are national benchmarks, not Blink’s rates. As a local independent mortgage company, our pricing is typically about 0.25%–0.50% or more below broad online averages, depending on the borrower, loan program and overall scenario.

That’s the short version.

FOR THOSE WHO WANT TO NERD OUT ON RATES:

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Here’s what has really been happening.

Mortgage rates are driven primarily by two big numbers:

The 10-Year Treasury + the Mortgage Spread = General Mortgage Rate

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THE 10-YEAR TREASURY

Think of the 10-year Treasury as the foundation.

In early October, the 10-year Treasury climbed to roughly 5.3%, helping push Mortgage News Daily’s benchmark mortgage rate as high as 7.61%.

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Since then, investors have moved more money into bonds, helped at different times by weakness in technology stocks, lower oil prices and broader economic uncertainty.  By Thursday, the 10-year Treasury had fallen to 4.84% and that decline has been a major reason mortgage rates improved.

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THE MORTGAGE SPREAD

The second piece is the mortgage spread.

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This is essentially the additional return the mortgage market requires above the 10-year Treasury to account for mortgage-specific risks, costs and investor demand for mortgage-backed securities.

Thursday gave us a good example:

10-Year Treasury: approximately 4.84%

Mortgage News Daily benchmark: 7.17%

Simple mortgage-to-Treasury spread: approximately 2.33%

Historically, a more normal overall spread has often been closer to roughly 1.7%.

So there are actually TWO ways mortgage rates can improve:

The 10-year Treasury can fall.

The mortgage spread can narrow.

Ideally, we get both.

WHY HAVEN’T RATES FALLEN FASTER?

The Federal Reserve held its benchmark rate steady last week, but it also said the economy remains strong and inflation remains elevated.

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Then this morning we received another strong jobs report: 165,000 jobs were added in October and unemployment fell to 4.1%.

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Strong economic news is generally good news for the economy, but it can be bad news for mortgage rates because it gives the Fed and bond investors less reason to expect lower interest rates.  That is why mortgage rates can move up or down even when the Fed does absolutely nothing.

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WHAT DOES ALL OF THIS MEAN?

The trend over the past month has been encouraging.

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We went from a 7.61% national benchmark to 7.17%, an improvement of almost half a percent.

And remember our purchasing-power rule of thumb:

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Every 0.25% improvement in rate can increase purchasing power by roughly 2.5% while keeping a similar principal and interest payment.  So a 0.50% improvement can mean roughly 5% more purchasing power.

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Whether you are buying a home, thinking about refinancing, investing in real estate, or simply wondering what today's market means for you, these are broad averages and your actual numbers are what matter.