Mortgage Insights

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Rates Increase Slightly to Catch up With Bond Markets

Nov 10, 2017

On Thursday, US mortgage rates increased for the first time since last week. This ended three days of the lowest rates since the middle of October, with yesterday’s rates being roughly the same as those recorded on November 3.

Meanwhile, bond markets closed at nearly the same levels seen on Wednesday. Under normal circumstances, that would mean stable mortgage rates as well. Yesterday’s departure from that rule was mainly the result of bond markets already starting to drop on Wednesday afternoon, but it happened too slowly and too late in the afternoon for the majority of lenders to issue new rate sheets.

Bond markets were also in weaker territory on Thursday morning when mortgage providers issued their rate sheets for the day. That meant that lenders not only had to factor in Wednesday’s weakness in bond markets, but they also had to consider the additional weakness experienced yesterday morning.

The recovery in bond markets that was seen yesterday afternoon suggests that credit providers have a good reason to issue lower rate sheets, but until now, only a couple of them have done so. If everything else remains the same, this means that many lenders will have some maneuvering space today and that mortgage rates are likely to move marginally lower.

In summary, a number of small triggers resulted in marginally higher rates on Thursday, but today can once again be seen from a more neutral viewpoint.

Mortgage expert Ted Rood pointed out that yesterday was a rather challenging day for bond markets, with uncertainty over possible US tax reforms and the European Central Bank’s tapering of its bond-buying program confusing traders.

He went on to say: “Despite the unknowns, MBS were virtually unchanged by early PM. Looks like our day to day swings will be negligible until actual details on tax reform are determined. With rates near their best since mid-Oct, it's a great time for risk averse borrowers to pull the rate lock trigger.”

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