Mortgage Rates Volatility Heads into the Holiday

Mortgage rates are continuing to see this high volatility from the bond and mortgage markets, as these levels are now at the high marks from the middle of 2015.  The markets have reacted to not only the election results and the anticipated returns that are anticipated from our new President, but we have also seen positive reports in October on most of our economic indicators.

After a rough start, we saw the 10yr rise all the way up to 2.42% before it closed at 2.35% today, and MBSs were at a negative 62BPS at one time before they closed in the negative by 25BPS.  Overall, rates are qualitatively in bad shape - relative to where they had been, at least.  What really is the big discussion here is not where the rates are, which many of us would argue is still historically low, it is the speed with which they have risen.  In just 3 short weeks, average rates are up more than half a point now - a feat seldom duplicated in the history of mortgage rates. 

Rapidly rising rates cause all sorts of problems.  On the subtle side, volatility makes it more expensive for banks to set rates for anything over 15 days.  That expense is passed on to consumers in the form of slightly higher rates across the board.  On a more obvious note, rapidly rising rates make for frustrated mortgage borrowers and generally elevated levels of stress throughout the industry.  Matters can be made worse by the media, as half the time they are still saying that rates are in the 2’s, when they are far from it unless you want to “pay for it”.

As I have mentioned before in many of my reports, and again this morning, the incoming administration's policies are driving a large portion of upward rate momentum.  Mortgage rates will be hard-pressed to make significant improvements any time soon.  Rates can move for other reasons, to be sure, but it would take something big and unexpected for rates to gain enough ground to get people excited again.

In summary, bond markets continued selling off today causing more stress and panic for all involved.  For new applications, unless you have a better crystal ball than I have (mine is broken) do yourselves a favor and lock for 45-60 days.  The reason for the longer lock period is due to the holiday lag in December.  Loans that are floating through the Trump-phenomenon that has occurred in financial markets, I still feel that if we move higher that where we are today on the 10yr, rates will continue to move upward.  I feel today was not an accurate move as this always happens on a long holiday weekend.  Let us see what Friday and Monday brings to us.

Have a Wonderful Thanksgiving!