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Mortgage Rates climbed swiftly this week, reaching the highest point since March 17th, 2015.
Mortgage rates are directly impacted by the trading of mortgage bonds on Wall Street. This week there has been rapid and deep movement to Bond Markets both in the US and Europe – like shaking a bottle of Coke before opening it.
See the chart below for how mortgage bonds (Called Mortgage Backed Securities or MBS in short) have been doing for last week or so. A Red stick means MBS declined in price that day and a green stick means it improved in price.
MBS has an inverse co-relation with mortgage rates. When they decline in price (red stick) rates go up and vice-a-versa.
As is obvious, not just its been mostly red days, these are long sticks too – meaning the decline has been sharp. The week ended with a gigantic 43 bps drop on May 1st.
While the economic news in US have been subdued, which should have helped mortgage rates, its the news coming out of Europe which is the real culprit. German Bund jumped in yield and out of nowhere Europe’s stocks are surging.
Next Week – Outlook continues to be bearish. The US 10 Year Treasury will potentially climb some more increasing the mortgage rates in the process.
At some point of time, we will see some minor fall in rates, but it might not happen as soon as next week.
If you are in the market to purchase or refinance – we are recommending not to float. Its safe to lock the rate if you are closing in next few weeks.