Market Environment Update: 

 

The first quarter of 2020 has been trying for the mortgage market.  Rates started the quarter at the highest levels we have seen in some time, followed by a steady drop during January and February, leading into March when concerns of Covid19 were dominating headlines.  As March progressed, and the nation went into lockdown, rates dropped off sharply.  Overall, we observed the 10 year treasury rate move from 1.919% on 12/31 to a low point of 0.543% on 3/9/20 before finally rebounding slightly to 0.67% on 3/31 or a 1.249% drop during the quarter.  However, during the quarter, mortgage rates did not follow as closely with the Bank Rate 30Yr index actually ending the quarter at the same place it was at the start of the quarter of 3.86%.  Freddie Mac’s survey rate showed slightly more movement beginning the quarter at 3.74% and ending the quarter at 3.50%, but a much tighter range than treasury rates for the period.  Additionally we continued to see an inversion in the yield curve with our average spread between 3 month and 10 year yields at -15bps for the period.  Lower interest rates did drive up the MBA refi index during the quarter with the index reaching a peak just prior to the Covid concerns during the week of March 5th of 6418.9 up from 1713.7 at the start of the quarter (a 275% increase).  The purchase index reached its peak of 313.7 during the week of January 24th up from 263.2 at the start of the quarter or a 19% increase before purchase volume began to slow slightly at the end of the quarter actually ending up down 20% overall. 

 

For short term rates which typically impact float earnings and advance costs, we observed a sharp drop in rates at the start of the quarter with rates moving from 1.908% to a low of .7405% on 3/12, before rebounding to end the quarter back up at 1.4505%.  

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