US mortgage rates increased marginally on Monday against the background of a rather unique set of conditions in bond markets during the Thanksgiving period.
The rates market is underpinned by bond markets, and there is usually a certain amount of participation on which mortgage lenders and traders can rely. During important holiday weeks, this participation typically wanes, and the players who do remain tend to act somewhat more conservatively.
This can be seen in the way in which interest rates remain within short-term boundaries and mortgage providers tend to avoid getting too aggressive with their pricing.
Within the wider restrictions of these boundaries, however, it is much more difficult to predict daily movements. With fewer market players active than usual, every trader potentially has more power to move the market in one direction or another. If fewer bonds are being bought than sold, no matter why, rates will start to escalate.
That is exactly what happened on Monday. Things might, however, move in the opposite direction quite easily today – although nobody should bank on that. Taking into account the idea that mortgage providers will be less inclined to reduce their rates should bond prices increase this week, when it comes to choosing between floating and locking, both rewards and risks are somewhat muted right now.
On Thursday, mortgage banks and bond markets will be closed for the Thanksgiving holiday and there will be no updated rate sheets from lenders. Friday will technically be a half-day for bond markets, but we can expect limited availability of new rates as well as the ability to lock. A lot of lenders will most likely just re-issue the same rate sheets from Wednesday afternoon on Friday.
Mortgage expert Victor Burek pointed out that it is normally difficult to lock during a week with public holidays. For those who do want to lock, he added, today would be the best opportunity.
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