Temporary Factors Help Mortgage Rates...Temporarily.
What exactly does that mean?
Rates are based on the bond market. Trading levels in the bond market are back in line with (or slightly better than) Tuesday's spiked up higher levels, but mortgage rates are still higher than those seen on Tuesday. It's really that simple.
Why is it to be expected?
Mortgage rates aren't created automatically based on the bond market. The bond market is merely the primary input. Lenders use bond prices/levels as a baseline for determining rates. If the market has been more volatile, lenders are quicker to raise rates and slower to bring them back down. This is especially true when rates have risen quickly to long-term highs, as they have this week. Moreover, today's bond market improvement was arguably driven by temporary factors relating to European politics and investor strategies at home.
Bottom line: it will take a much bigger, much more sustained move in bond markets for lenders to make meaningful changes to mortgage rates. Until then, it makes sense to remain defensive in terms of locking vs floating.
Courtesy of Rick Lombardo 310.435.7439, Rick.Lombardo@grarate.com, VP of Mortgage Lending at Guaranteed Rate.
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