Mortgage Rates Rise to 3-Month Highs - Merry Christmas Everyone!

Mortgage Rates rose to new 3-Month Highs today as bond market weakness (read: higher rates) is magnified by holiday trading conditions.  In other words, there are far fewer MBS (mortgage-backed-securities, which directly affect rates) being traded this time of year, so if there is an imbalance toward strength or weakness, it tends to have a bigger effect on lender rate sheets.  In the current case, that imbalance favors higher rates.

In addition, lenders typically err on the side of caution (read: higher rates) during this time of year, regardless of bond market movement.  That doesn't mean they'll always raise rates in December,  simply that rates are set just a bit higher than they otherwise would be during more active trading.  The combination of the market weakness and lender defensiveness made for new 3 month highs. 

Most borrowers will experience the movement in terms of the closing costs associated with their quoted rate, while the rate itself remains unchanged.  The most prevalently quoted rate for ideal, conforming 30yr  Fixed loans is still 4.625%, but 4.75% is as close as it's been since early September.

A slow, short session in bond markets today ended with slightly higher rates. We can hope it was caused by preoccupied traders eager to attend to Christmas activities or year-end portfolio balancing; time will tell. This time of year typically has low loan volume, and current loan applications are at an 8 year low.

Merry Christmas Everyone!