US mortgage rates moved very little on Tuesday. Most credit providers offered marginally better rates yesterday morning, but the weakness in bond prices prompted many of them to release higher rate sheets around the middle of the day.
Generally speaking, that trend might continue, and the past couple of days might merely have been a pause. Whether it is the beginning of a reversal or merely a pause, both would start in the same manner.
The vital development in the bond markets that underpin rate movements has been an apparent shift to lower prices, which means higher returns on bonds and also higher mortgage rates as a result. If one uses returns on 10-year Treasury Notes as a benchmark, we would like to see 2.60% becoming the new ceiling.
The missing ingredient right now is a shift toward a crucial floor. In the current scenario, a great first step would undoubtedly be for the yield on 10-year Treasuries to drop to 2.52%. If it should fall to 2.42%, that would likely correspond with rates on 30-year fixed-rate mortgages dropping to an average of around 4.0%.
Mortgage expert Jay Bridges said that near closing time on Wednesday, bonds were rallying just below their highest levels of the day following a drop in stock prices. A couple of lenders issued higher rate sheets at that point. He advised borrowers whose lender of choice was one of these to float over the short term in the hope of catching a break.
Another mortgage expert pointed out that bond markets remained relatively flat on Tuesday as stock prices approached new highs. He added: “I have to wonder what rates would/will do if/when stocks ever regress, but not banking on that happening soon. There’s limited pertinent data the rest of the week, I doubt we’ll see any huge pricing swings. A few lenders have repriced worse in the last 30 minutes, I’ll continue locking early.”