What Are Current DSCR Loan Rates? Key Market Movers & How to Track Rates for DSCR & Non-QM Loans

After a decade of relative stability in mortgage rates, recent years have seen unprecedented volatility and change in mortgages rates. Interest rates are often a key concern for real estate investors. Many times the mortgage makes the difference between a cash-flowing deal and a dud. Since the spring of 2022 when the Federal Reserve embarked on its latest rate-hiking cycle. Interest rates on the most popular loans for real estate investors – DSCR Loans (part of the “Non-QM Loans” category) have moved at unprecedented speed. After many months of rates moving at most a few basis points a week, the market experienced dramatic and massive movements. Sometimes, changes in one day were bigger than those seen in previous quarters or years!


Real Estate Investors navigating the challenging market of 2024 – with mortgage rates still at elevated levels – are at an advantage when able to lock in financing terms or plan purchases when DSCR Loan rates are favorable. But figuring out what to look for and what moves mortgage markets can be challenging. This article reveals the biggest drivers of mortgage rates and teaches you to watch the market like an expert!



Bond Market Concepts: What Determines Mortgage Rates


In 2024, mortgage rates in the United States are largely influenced by the overall bond market. Most residential mortgages, including conventional qualifying mortgages, residential investment mortgages (DSCR loans), and other alternative residential mortgages (Non-QM), are securitized. This means they are bundled and sold as bonds, which pay interest to investors looking for a steady, fixed return​. These investors are typically large financial institutions looking for safe and predictable returns, such as pension funds, insurance companies and banks.


Key concepts to understand in economics and finance are risk and reward. Risk should be thought of neither as “good” nor “bad,” but rather always in relation to the associated reward or returns. For example, a 10% return (or “reward”) can be worth the risk if you are investing in a Class A Single Family Rental in a great market with an A+ tenant. However, it is not worth the risk if for example, you are betting on a 16-seed to make it to the Final Four in March Madness!


The investors in mortgage bonds utilize the risk and reward framework when allocating how to invest capital. Mortgage bonds have multiple alternatives they weigh against. As such, one of the biggest drivers of mortgage rates are the other options investors have for returns. When people refer to the Federal Reserve “setting rates,” they mean the “Effective Federal Funds Rate.” This is the rate at which banks charge other institutions on an overnight basis. Since banks can earn this yield with essentially zero risk – other alternatives (that have risk) would need to provide higher returns. This is why when the “Fed hikes or cuts rates” it affects all other sorts of financial instruments.


However, the main benchmark for bonds, mortgage bonds included, are US Treasury Bonds, or bonds issued by the United States Federal Government. While the current fiscal trajectory of the country has some issues, it is generally referred to in finance as the “risk-free” rate. This rate is the main economic alternative to mortgage bonds. One key insight is that conventional mortgage bonds (mortgage-backed securities or “MBS”) made up of GSE-backed mortgages are benchmarked with the United States 10-Year Treasury Bond. In contrast, MBS composed of Non-QM mortgage loans, including the crucial DSCR Loans for real estate investors, are benchmarked with the United States 5-Year Treasury Bond.


These mortgage bonds trade with a spread or higher amount of rate/return needed versus the treasury bonds to account for the higher risks. Investing in mortgage notes backed by homeowner and real estate investor borrowers is riskier for investors than notes backed by the US Federal Government. Generally, the “spread” to account for the higher risk has historically been around 170 basis points (or 1.7%). However, in recent years, this has ballooned to around 300 basis points (or 3%) amidst lots of volatility.


Quick Summary – Without delving too deeply into math and financial fixed income calculations, mortgage bonds usually yield returns based on US Treasury Bonds. When bonds are sold, yields rise, meaning investors demand higher returns for the risk. When bonds are bought, yields fall, meaning investors accept lower returns. Therefore, mortgage lenders adjust their mortgage rates according to movements in the Treasury bond market. The main drivers of changes in Treasury bond yields are economic data influencing investor expectations about future Federal Reserve decisions. These decisions involve the effective federal funds rate. For DSCR Loan interest rates, this means tracking movements in the 5-Year Treasury Bond. This is the best alternative for DSCR Loans, as borrowers typically hold these loans for around five years before selling or refinancing.



Note on Numbers vs. Expected Numbers


Before diving into the main financial data pieces to watch for that move yields – a final very important financial concept to cover is how the markets interpret data. The key point is that data is typically interpreted as compared to expectations rather than month-over-month or year-over-year numbers. Typically, banks, funds and traders will have an expectation or estimate on key economic data releases. These are often created through sophisticated and complex financial models. When a number comes in, its comparison to market expectations is paramount. This is why there can be muted market responses to actual Fed rate hikes (as they often telegraph ahead of time to the point where the change is fully expected/estimated and thus “priced in” ahead of time).



Key Economic Data Releases that Move Mortgage Rates


Here are the key economic data releases that most affect treasury yields and mortgage rates; understand these and plug into your calendar, and you will be a mortgage rate magician in no time!


Consumer Price Index (CPI)

For even casual interest rate watchers, it should come as no surprise that the monthly Consumer Price Index (CPI) release is key to interest rate movements. CPI measures general inflation for consumers for major individual expenses such as food, gas, shelter and other basics. A key driver of the Federal Reserve interest rate policy is to fight the recent elevated inflation that has been plaguing the country since 2021.


CPI is released by the Federal Government U.S. Bureau of Labor Statistics (“BLS”) once per month (usually around the mid-point of the following month) at 8:30 A.M. eastern time. The “headline” number or main number you typically see in media reports is the percentage change in inflation versus the prior year. So for example, a release of an “all items index” rise of 3.4% for April 2024, means that prices rose by 3.4% when compared to prices in April 2023.


Key to remember is that while the overall number is important, and comparisons to prior year and prior month are key, the main thing that affects interest rates (and thus mortgage rates) is the number (percent change year-over-year) versus expectations. The expectations in this case typically a median number from the models of the major banks. Here is an example of the structure of expectations for a CPI release (sometimes called “print”). CPI coming in “above estimates” generally will mean that mortgage rates will rise (causing the Federal Reserve to lean towards higher interest rates to fight inflation that’s greater than expected) and vise versa (lower than expected, would cause mortgage rates to fall). If mortgage rates come in exactly as estimated by the banks, then treasury yields and mortgage rates will likely not move much. If you have ever been confused as to why a big “decrease” or “increase” in CPI didn’t seem to move things – this is probably why.


Job Openings and Labor Turnover Survey (JOLTS)

The Job Openings and Labor Turnover Survey – commonly referred to as the “JOLTS” report is another closely watched data release from the BLS that can move rates up and down.  This is a monthly report that shows how many Job Openings are currently posted in the US.  Like other monthly data reports from the BLS – the market reaction to this report is mostly about job openings versus expectations.  One quirk of this data release it comes out at 9:00 AM eastern instead of 8:00 AM eastern like most other reports.  This can lead to mortgage market moves a bit later in the morning that people are used to. 


One recently highlighted issue regarding the JOLTs Report however is that it is truly a survey – i.e. reliant on responses from companies.  The BLS has highlighted this issue – noting a sharp decline in response rates over the last decade. The increasing reliance on “”estimated” data raises doubts about its reliability among market experts. This opens opportunities for entrepreneurial individuals and companies to explore alternative measurement methods.


Jobs Report

Another key monthly economic data release from the BLS that can greatly affect interest rates is the Jobs Report – which estimates how many overall jobs (nonfarm payroll employment) were added or subtracted in the prior month as well as a calculation of the unemployment rate. In 2024, this report may have overtaken CPI as the biggest market mover, as many financial experts expect the Federal Reserve to potentially cut rates if large job losses occur and the unemployment rate spikes, even if inflation had not yet returned to target of 2%.


These reports are typically released on Friday mornings, also at 8:30 AM eastern time, once per month. Like CPI, the most important factor for how it will affect yields and mortgage loan rates is the reported numbers versus estimates (for both change in number of jobs and unemployment rate percentage) rather than comparisons versus prior timeframes.


Jobless Claims

While the CPI Report and Jobs Report are the typically the biggest monthly market movers, the release of “Jobless Claims” also has a big effect on yields and mortgage rates. This report is weekly, not monthly, and is released every Thursday at 8:30 AM eastern time. It measures the amount of both people newly filing for unemployment as well as “continuing claims.” Like the previous monthly reports, the market typically reacts to numbers in comparison to estimates.


Producer Price Index (PPI)

The Producer Price Index (PPI) Report is similar to CPI, however it tracks costs (and inflation) for producers, such as product manufacturers or service suppliers. This report is monthly and typically comes the day following the CPI Report. While it can have an effect on yields and mortgage rates if it comes in higher or lower than expectations, it typically has a much smaller effect than the CPI Report.


Personal Consumption Expenditures (PCE)

The Personal Consumption Expenditures (“PCE”) Report is another measure of inflation, this one released by the Bureau of Economic Analysis instead of the Department of Labor. It is typically released about two weeks after the more well-known CPI Report. While the CPI Report is generally more well known, the PCE Index is grabbing more attention as the “Federal Reserve’s preferred measure of inflation” and is gaining more attention by market-watchers and is considered more comprehensive data. This is also a monthly report released at the standard 8:30 AM timeframe.


Fed Meetings, Minutes and Media Interactions

While Federal Reserve Meetings are when specific rates changes (or “no changes”) are announced, by the time the actual announcement happens, markets and rates rarely change too much since the move is generally predicted and priced in (If you would like to track market expectations of rate changes, this tool from the CME Group is extremely useful).


However, yields and mortgage rates can be greatly changed by Federal Reserve actions – the real drivers are the policy press releases and the press conference (typically scheduled early afternoon a couple hours after the publication of the “decision”). There, market traders decipher the statements of the Federal Reserve Chair and the answers to questions from the press. Yields can dramatically spike up and down during the press conference!


Additionally, the “minutes” of the Federal Reserve meetings are usually released a couple weeks after the date of the decision and release. While the lag between the meeting occurrences and the minutes release make a lot of the data stale, the minutes releases can indeed move markets as investors can gain further insight into the conversations among voting members.


What is the Fed’s “Dot Plot”? An additional driver of rates is the quarterly release of a “dot plot” showing each Fed official’s projection for interest rates for the upcoming couple of years. Since this chart is harder to boil down to a single “expectation number” like the previously discussed reporting metrics, this rarer release can affect yields as it provides an infrequent insight into the longer-term rate outlook from Federal Reserve officials.



University of Michigan Survey

As inflation has taken center stage in the last few years in the United States, formerly minor surveys and data releases have increased in importance and effect on Federal Reserve rate thinking and thus mortgage rates. A monthly survey conducted by the University of Michigan that measures consumer sentiment and inflation expectations has had an effect on yields and offered a data point for predicting Federal Reserve actions.


Purchasing Managers Index (PMI)

An additional form of report that is starting to gain steam in terms of affecting mortgage rates is various regional “Purchasing Managers Index” reports – which offer a glimpse into the health of the economy. A sharp downturn in economic metrics (leading to higher unemployment) is seen by most bond market experts as the likely catalyst for the next round of sharply reduced rates. So when we have seen recent low readings (versus expectations) of some of these types of reports lately, yields and rates have fallen. One example of a PMI Report is the “Chicago Purchasing Managers Index” which determines the health of the manufacturing sector in the Chicago region. To follow these reports, its critical to understand how the metric is derived – in this case, there is a score given between 0 and 100 with 50 meaning stable, above 50 equating to “expansion” and below 50 indicating a “contraction.”



Large treasury auctions, or large sales of new Treasury Bonds by the United States Federal Government have also had an effect on mortgage rates. These large sales can move bonds higher or lower depending on investor appetite and pricing. Unlike most of the other reports that generally come early in the morning before many mortgage lenders release rates for the day, these typically occur in the middle of the day or afternoon, and can be responsible for mid-day mortgage rate moves.



TL; DR Summary

While the bond market and US financial system can be daunting and complex – following changes in DSCR Loan rates (rental property mortgage rates), it mostly boils down to future expectations for Federal Reserve rate decisions – which are primarily driven by various economic data reports that measure inflation and the strength of the jobs market. When will mortgage rates drop? Nobody knows for sure, but if you are tracking the above indicators and start seeing data showing inflation coming in below expectations and fewer new jobs and more unemployment, a drop in investment property loan interest rates will surely be soon to follow.



Recommended Tools and Resources for tracking DSCR Loan Rates:


As America’s leading lender for investment properties, Easy Street Capital is committed to serving as not just a lender, but a partner for our borrowers as we seek to empower everyday people to achieve financial freedom through real estate investing. As such, we will continue to provide free content on industry insights (including updates on mortgage rates and market conditions) right here on our website. Like your updates in video or audio format? We also publish market updates frequently on our Youtube Channel (make sure to subscribe to never miss the latest releases) and TikTok!


Follow the author of this piece, Easy Street Capital Partner Robin Simon, on multiple social platforms including X and BiggerPockets for daily market insights as well!



Recommended on X (formerly Twitter):


Here are five accounts (unaffiliated with Easy Street Capital) we recommend for updates on mortgage rates and the key data releases (and interpretations)


@KobeissiLetter is an industry leading commentary on global capital markets and is a great source for weekly calendar updates on events and data releases that drive interest rates.

@NickTimiraos is the Chief economics correspondent of the Wall Street Journal and an expert into Federal Reserve thinking.

@LoganMohtashami is the Lead Analyst for Housing Wire, a residential real estate publication, and an expert forecaster in the world of mortgage rates and general United States housing market.

@MMGtweet is an account powered by Tabrasa, a leading industry source for mortgage market insights in the United States, providing frequent updates into MBS trading and the effect on rates.

@zerohedge is an alternative financial news website that provides prolific and timely updates on all of the applicable data releases, including insights on the all-important “expectations” numbers.



Recommended Websites / Tools:


Mortgage News Daily is a website dedicated to the mortgage industry and provides extremely insightful data, content and analysis on the daily changes in mortgage rates and the activity in mortgage bond (MBS) markets.

CME Group provides the invaluable “FedWatch Tool” that shows the probabilities (priced in) expectations of Federal Reserve Rates for upcoming meetings looking approximately one year ahead

Truflation is a website based on decentralized tracking of inflation aiming to be a more accurate and data-driven alternative to traditional economic data releases like the BLS CPI.



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About the Author

Robin Simon