Mortgage Charges Start The Week Barely Larger
Mortgage rates rose a little higher to start the vacation-shortened week. As Labor Day is a public holiday, mortgage lenders closed yesterday, although much of the world remained open. Futures and overseas markets thus had a little more time to distance themselves from Friday’s recent levels. In the present case, this distance ran in a price-unfriendly direction.
The damage is by and large minimal. On average, lenders quote the same rates as last week, but with slightly higher closing costs today. Most of the weakness in the underlying bond market is focused on US Treasuries as opposed to mortgage-backed securities (MBS), which serve as the basis for mortgage rates. The Treasury-specific weakness is likely due to the presence of several large Treasury auctions this week, as well as the large corporate bond issuance (which tends to hurt Treasuries more than MBS).
What’s the implication? There is potentially good news and bad news. If the bond market manages to get through the next few days without losing too much ground, we could see a dynamic reversal in the other direction and bring rates back to last week’s lows. One potentially negative note: if the government bond auction cycle encounters weak demand, the broader bond market could shift gears in such a way that we see some momentum towards higher interest rates. It’s too early to say what kind of news we’ll be getting, but things could clear up as early as tomorrow afternoon.