After a brief spurt of increase last week, it seems that a rise in mortgage rates may become more solid in weeks to come. As of Tuesday, most lenders were offering 30-year fixed rates of 3.5 to 3.625 percent, up from the 3.375 percent rate that we have gotten used to during Summer 2016.
Even that was somewhat sudden however. Rates were sitting lower on Tuesday morning and the upward shift can be correlated directly with the change in the bonds market that occurred during the middle of the day. Prices fell and yields rose and—as the bonds market is the best way to predict mortgage rates—many lenders were forced to issue a reprice of their morning rates to follow bond prices.
“Ugly move today with bonds. There was no specific cause of the move or breaking news…just momentum picked up and nobody wanted to catch the falling knife,” said Victor Burek of Churchill Mortgage.
Burek would continue his quote, but we feel the need to point out first that his advice was drastically different than what some were saying, and you really need to come down on one side or another here. One thought would be it seems mortgage rates seem to be heading uphill, and the potential for a Federal rate rise as soon as October could push them higher, faster. Under that logic, it makes sense for buyers to lock in their rates now. However, Burek seems to think that Tuesday’s uptick was a slightly panicked move on behalf of lenders, and floating makes sense for the moment.
“Since all lenders have repriced for the worse by now, I feel it is worth the risk to float over night and check pricing in the morning. During sell offs like this, lenders do tend to take away more than the price drop in bonds justifies,” he noted. Interesting.
There are also multiple ways to interpret the numbers released this week by the Mortgage Bankers Association. Total Mortgage Applications actually rose 4.2 percent last week, with the majority of that coming from those applying for a new home (and not a refinance, as tends to be the case). Applications for purchasing a new home alone were up 9 percent from the week before.
The more jittery interpretation of these facts (the kind that Burek would probably expect from us) would be that buyers are sensing the looming rates rise, and are jumping to get their homes now. Then again, numbers released last week from the U.S. Census Bureau showed a median income rise of 5.2 percent during 2015, which was the highest since the economic downturn of 2007. It’s possible that people are just buying more homes because they’ve got more cash.
As usual, stay tuned and keep an eye on rates until next week.