The Market Giveth and Taketh Away!

Hello all! Hope you all enjoyed the beautiful weather this weekend! Buckle up for another eventful week in the mortgage world!

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Rates ended HIGHER compared to last week, and volatility was HIGH. Rates remain in the mid-7 range for most loan types without paying discount points. Paying discount points can get you in low 7’s.

The Market Giveth and Taketh Away!

After rates enjoyed the 3rd biggest decline in over a decade, we saw rates give up some of that momentum towards the end of last week. On Thursday and Friday, we saw the market push mortgage rates up ~0.25% in just a short, couple of days. Not a huge movement, but a reversal compared to the week prior, nonetheless. The main culprit, a failed Treasury Bond auction and the Fed.

Remember, Treasury Bond prices have an inverse relationship with mortgage rates. The more Treasury Bonds that are issued, the lower the price of the Bonds. As Bond prices go down, mortgage interest rates go up and vice versa.

The government sells these Treasury Bonds at auction. It is evident by the lack of buyer demand at the Auction on Thursday that the number of buyers is becoming few and far between. If no one is buying our bonds due to our increased debt levels, the price of the bonds will go down, which means mortgage rates increase.

Jerome Powell Issues Warning

Another reason for the market worsening last week was due to Fed Chair Jerome Powell speech on Thursday warning that the Fed wouldn’t hesitate to continue to raise rates in order to slow inflation. Obviously, the market reacted negatively as many believed that the Fed wouldn’t consider raising interest rates any further. Clear indication that Powell believes the Fed has a long way to go in order to tackle the inflation beast.

A new CPI inflation report is set to be released on Tuesday. If the inflation numbers come in high, expect the markets to react negatively and for mortgage rates to increase. A hot inflation report will only raise fears of more Fed rate hikes.

On a lighter note, during Jerome Powell’s speech, he dropped the F-bomb due to his speech being interrupted by protestors. Refreshing to see the human side of Powell 😊

Instagram Posts from Last Week

Don’t hesitate to reach out if you need anything at all. Have a wonderful week!