US mortgage rates increased slightly on Thursday, marking the strongest three-day rate increase since the latter part of June. Yesterday’s rise left most mortgage lenders offering rates more than 0.125% higher than those quoted on Monday. A rate hike of this magnitude would have been typical for a big move in previous years, but such a move has not been very common this year, especially since rates started to move in such a narrow range towards the latter part of October.
The weakness noted in yesterday’s mortgage rates was small, but it contrasted with the slight improvement recorded in the bond market. Timing was a contributing factor to this anomaly. The bond market weakened in the afternoon on Wednesday, but most lenders did not make corresponding changes in their rate sheets at that time. This meant that most lenders reflected Wednesday afternoon’s weakness in yesterday’s rate sheets.
The improvements in the bond markets suggest that we have already experienced the worst of this week’s rate increase, but it is prudent to remain cautious rather than taking aggressive actions when it comes to floating and locking. Nevertheless, since the bond markets are only operating for a half-day today and both mortgage lenders and bond markets are closed on Monday for the Christmas holiday, most lenders will be on the conservative side when setting today’s rate sheets.
US mortgage expert Ted Rood offered this take on the bond market and mortgage rates: “Bond markets were fairly flat today [Thursday], but the damage has been done. As we ease into Christmas/New Year's weeks, market participation will be limited at best, leaving limited potential for meaningful rallies. Anyone closing within 30 days definitely needs to be locking, unless they have a huge penchant for risk.”
Mortgage expert Victor Burek suggested floating until December 26 on loans that are not already locked. He noted that many traders have taken off for the weekend because there will only be trading in the morning today.
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