Mortgage Rates Continue Upward - When Will This End?

Mortgage rates continue their path upward.  Last week, if someone would have mentioned that the rates would have been above four percent on a 30-year mortgage, everyone (including myself) would have told you that we would probably be looking at that come this Spring…  not one week later as is the case.

Trump’s surprising victory is continuing to roil markets. A week ago markets thought he was a dead man walking, many that now are ringing bells were trying to distance themselves now blowing trumpets. It is a Mad, Mad, Mad World. A week ago Trump was considered by many as unfit to be President - now he is, and those views seem to have moderated somewhat. Less than a week and markets are going postal.

The biggest concern with this rate hike that makes this real scary is that we do not know what the coming weeks and months will look like!  As recently as last Thursday, quite a few market participants figured that rates had gotten so much higher so quickly, that it surely must have been a knee-jerk reaction to the presidential election that would soon be reversed after the 3-day Veteran's Day weekend.  Yet here we are on Monday with rates still surging higher.

Now for the big question: when will this end? 

Technically the bond and mortgage markets are over-sold in the near term but the momentum continues so far. To remind, although we look for some rebound at best and consolidation at least, the trend for higher rates is on solid footing. The financial markets are over-reacting to possibilities that are still uncertain and possibly unlikely. The dollar’s strength also overdoing it as it continues to strengthen, supporting the heavy selling in the bond market. Nonetheless do not fight it now.  Locking still makes sense until and unless we see a substantial move back toward lower rates.

In summary, bonds continued their epic selloff today, as rates rose again.  In 4 business days, we have now lost close to 200BPS and the 10yr is at 2.26% when last week we were at 1.82%.  Since 2000, I have seen this epic scale of "face-melters" twice, in 2004 and the "taper tantrum" of 2013.  We are past the point of hoping to regain last week's pricing – it is not going to happen - time to look forward, instead of back.  My suggestion is to lock unless you have a crystal ball that can help us all figure out what is going to happen.