Mortgage Insights

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Mortgage Rates Continue to Rise

Dec 21, 2017

US mortgage rates continued to rise on Wednesday, mainly due to momentum from yesterday carrying over into bond markets. There was far less trading in the market yesterday, and the rate movement was much smaller. However, any amount of additional rate change would be sufficient confirmation that there has been a shift in what had been an extremely flat rate range during the past three months.

The average mortgage lender has now increased its rate by at least 0.125%, putting most lenders in line with rates that have not been seen since late October. Late October was a short period of higher rates, with early July also having a similar period of briefly higher rates. The last period of conclusively higher rates occurred in May.

Bond market rates are moving because of their own technical reasons. While the tax bill had been influential on rates earlier, it has been inconsequential for the past two days. It is merely a coincidence that the bill’s passage coincided with the latest volatility in the bond markets.

The second half of December is usually a time of uncertainty for movements in bond markets, and the markets won’t be robust until the second week of January. For now, the previous sideways rate trend has changed to rates now trending higher. There will need to be a significant improvement before it can be said that the new upward trend has ended.

It appears that there is the potential for continuing the trend for mortgage rates to increase. A few occasional positive days in the bond markets will not be sufficient to change that outlook.

US mortgage expert Ted Rood had this to say about Wednesday’s bond market activity: “Bond markets continued yesterday's sell-off, albeit at a slower pace today. As year end nears, [it] seems quite apparent that investment firms are rotating into stocks at bonds' expense. I don't foresee a quick bond bounce back, time to play defense and lock sooner, rather than later.”

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