This week’s mortgage rates gravitated around the Federal Reserve…which seems like one of the more obvious sentences that we’ve ever typed. But what if we told you that rates also reacted to the state of the bond market? Yeah, still doesn’t seem like anything too dramatic, but don’t let the “normal” news mislead you: Rates have been jittery as of late.
“Markets have been overwhelmingly volatile, and continue to pose a major dilemma for all borrowers who are not protected,” said Gus Floropoulos, vice president at The Federal Savings Bank. He’s not kidding.
You already know, based on these posts from the last few weeks, that rates have jumped between three-month lows and three-week highs from week-to-week. Part of this is to be expected with a new presidency, but lenders are working to stay a step ahead of the Fed and its policies as well.
First, on Tuesday: Lenders began inching rates upward ahead of the release of the Fed’s minutes, as most have taken recent statements from the body to indicate that an increase in rates may be coming fairly soon.
Then, the minutes suggested that a rate increase will be coming, and we quote, “fairly soon.” Which led lenders to once again drop rates by roughly the same margin that they had raised them the day before. Many classified the minutes as “slightly less threatening than expected,” which in turn led to bond market improvement, which led to improved lender offerings by yesterday afternoon.
Although Floropoulos is 100 percent correct in his description of rates as “volatile,” the good news is that the volatility has been stuck in a zone ranging between 4.125 and 4.375 percent for the last few months. That might not seem dramatic but homebuyers should still look to lock in a rate whenever possible. Historically, this sort of sideways movement has preceded a dramatic shift in one direction.
So let’s flash back to this week’s Fed minutes. A rise in the Federal interest rate is coming “fairly soon.” That means that mortgage rates can be expected to go up fairly soon as well. Sure, there’s always a chance that rates could dive downward, back to 2016 levels…but the odds aren’t in your favor. To look back at last week’s post and a recurring theme: “The trend is not your friend.”
Locking in is the way to go if you can close in the next two months.