Mortgage Rates Again Moving Lower

Mortgage rates are moving lower today with many factors assisting this direction. Geopolitical tension between the U.S. and North Korea has intensified over the past week, with the latest provocation coming over the weekend with the news out of Pyongyang that their largest-ever nuclear bomb was successfully tested. Hurricane Irma is also causing somewhat of a stir, but nothing like the news overseas.

Predictably, U.S. officials were incensed and had some firm words for North Korea. Defense Secretary Jim Mattis said that there would be a “massive military response” if there were an attack on the U.S., Japan, or South Korea, while U.S. ambassador to the United Nations Nikki Haley said that Kim Jong Un was “begging for war.” All of this has caused financial market participants to take a risk-off attitude and rush into the perceived safety of government bonds. The yield on the 10yr Treasury note dropped to 2.06% today with MBSs following the same pace at a positive 41 BPS.

This is the lowest level since just a few days after Trump was elected in November. Mortgage rates tend to move in the same direction as the 10yr yield, so rates are starting out the week at some of their lowest levels of the year. How long they will stay this low depends on how the situation unfolds. Just as we saw last week when a similar pattern took hold, investors can regain their confidence quickly if no further action takes place. It is very hard to hang your hat on that outcome right now, though, with Kim Jong Un being such a wildcard. Still, it does seem more likely than not that we will see rates move higher over the long-term.

In summary, mortgage rates have sunk to extremely accommodating levels. With the long-term trend still projected to be for rates to move higher, right now is the perfect time to take advantage of a downturn and lock in a rate.