Mortgage rates skyrocketed this week and are .5% higher than Monday. Two things have driven mortgage rates higher:
1- The threat of inflation is omnipresent in every economic report.
2- Two mortgage companies defaulted on their lines of credit.
Remember when I talked about how important it is to use a mortgage planner who subscribes to real-time MBS pricing?
Why am I so adamant about the fact that the ten-year treasury note is not the determining factor of mortgage rates?
The statement is factually incorrect. While the two securities often move in concert, polarity can occur and sometimes does; this is one of those times. The ten-year T-note is considered the benchmark, not bellwether fixed-income security. This means that all other securities are compared to the 10-year T-note (we call that the “spread”).
It is GENERALLY a guiding indicator of ALL rates, however, in times of crisis or exuberance, it can’t be relied upon for other fixed-income securities’ direction. Spreads to the T-note widen and narrow due to extraneous variables.
Today is what of those times. Most loan originators will be telling you to lock today because the treasury bond market is up. Today, I’m telling you to hold off your rate locks until the mortgage market goes through some price discovery.
I think that traders are overreacting to the defaults. New mortgages, funded today, do not have the same risk to investors as the loans funded in 2003-2006. The stricter underwriting guidelines will actually be the saving grace; mortgage rates will come back down when Wall Street realizes that the past doesn’t equal the present.
Big economic news is due out on tomorrow; the employment report.
So, wait. Don’t lock your mortgage rate today.
You should check Mortgage Rates Report often to see any developments. While I recommend that you float your mortgage rate (if you don’t have it locked already), I could change that recommendation on a dime.