Mortgage Rates

Mortgage Charges Barely Decrease Regardless of Bond Market Weak point


Mortgage rates moved slightly down today despite moderate weakness in the bond market. Typically, when all other factors are equal, the weakness of bonds causes interest rates to rise. The most common reason for this type of discrepancy can be summed up in one simple word: TIMING.

The bond market moves during the day. However, mortgage lenders prefer to adjust interest rates only once in the morning despite spending lunch breaks in a volatile bond market. In yesterday’s case, bonds improved over the course of the day, but not enough for the average lender to hand out a midday price. Even then, lenders do not tend to pass on all of the improvements that come from the gains in the bond market at once.

Bottom Line: Lenders were still grappling with the strength of yesterday’s bond market as they had to issue today’s first interest sheets. By the way, the shoe is now on the other foot. Bonds lost enough ground this afternoon to suggest that mortgage rates should be back at yesterday’s levels. If bonds don’t change much overnight, it wouldn’t be a surprise if the average lender got a slightly higher rate by tomorrow morning.