Mortgage Insights

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Mortgage Rates Rise to Late October’s Levels

Dec 20, 2017

US mortgage rates rose on Tuesday, ultimately reaching levels that were last seen in late October of this year. One reason behind the large magnitude of the rate increase in one day was the fact that the recent range of mortgage rates has been very narrow. In many cases, the difference in quoted rates between Monday and Tuesday was due to higher closing costs associated with Tuesday’s quotes. In any event, mortgage borrowers were looking at a 0.125% rate increase with many lenders.

Mortgage rates did not receive any clear guidance from economic reports. Financial data was mixed, with gold and major stock market indices rising, oil prices holding relatively steady, CNNMoney’s Fear & Greed Index rising slightly, and ten-year Treasury rates increasing modestly.

After the progress made in Congress on Tuesday on the tax bill, it might be tempting to assume that the increase in rates was related to the imminent passage of the tax bill. In reality, that is not the case. The rate increase is mainly due to the environment that exists in the bond market’s year-end trading and other technical considerations unrelated to the headline-making events in Congress. While that is not a satisfying explanation, it’s better than assuming that a trend to higher mortgage rates has already begun due to the tax legislation.

While such an impetus may or may not be coming soon, the tax bill was not a factor in Tuesday’s rate increase. A good indicator of this was the Senate parliamentarian’s last-minute ruling that forced the House to vote again on the tax bill after they had already voted to pass it. This means that the Senate voting to pass the bill will not send the legislation to the President to sign it into law on Tuesday. If the tax bill had been a factor in driving the market, that snafu should have registered at least a small rate change when the news was reported, but none occurred.

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