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Mortgage rates started the week with a modest jump to what was essentially their highest level in more than a month. Less than 24 hours later and the average lender is back to last Friday’s levels. what’s up with that?
Investors drive mortgage rate movement through the buying and selling of bonds. Buy more = lower rates. More sales = higher rates. Investors sold bonds yesterday after First Republic Bank was absorbed by JPMorgan, which was about as orderly as it could get.
But rather than rest on the assumption that First Republic was the last of the troubled banks, financial markets pounced on the share prices of several other banks this morning, ultimately halting trading for many of them.
Concerns over the banking sector prompted investors to buy more bonds. This was a driving force behind today’s reform. Additional support came from slightly softer labor market data. All of the above had some traders revising their expectations for the Fed’s rate hike outlook — especially timely as there was near-unanimous consensus for a 0.25% hike yesterday afternoon.
Between the Fed’s rate hike decision and the morning’s economic data, it is safest to plan for ongoing rate volatility. For now, the average lender is back in the mid-range of 6%, while yesterday it was closer to 6.75% for the top-tier 30-year fixed rate.
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