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Mortgage Rates Officially Highest in at Least 5 Years

Mortgage rates edged up to 4-year highs with yesterday's bond market losses and things went from bad to worse today.  Bond markets (which underlie and directly affect rates) are under extreme pressure today and have generally had a very bad September.  Weakness in bonds equates to higher rates.

So why are bonds weak?

In part, this is weakness that was expected way back at the beginning of the year as the tax bill came to fruition and as economic data continued to suggest ongoing expansion.  Given that the inflation/growth outlook was a whole lot worse in 2013 and early 2014 when 10yr Treasury yields briefly crested 3.0%, it stood to reason that those same yields would almost certainly need to move well over 3.0% this time around (inflation/growth are key factors in Treasury yields and rates in general).

After hitting 3.13% in May, 2018, 10yr yields calmed down and managed to hold under 3% ever since, with a few moments of modest exceptions.  Today presents the most serious attack on the 3% ceiling since then, and it begs the question of whether we'll see those previous highs tested.  

Things are slightly worse for mortgage rates, which only generally follow the 10yr Treasury yield.  Back in May, mortgage rates were a little better than they are now, relative to 10yr Treasuries.  As such, today's rates are the highest in at least 5 years for some lenders (there were a few days in the middle of September 2013 that were worse) and the highest in 7 years for any other lenders.   In both cases, we're talking about average conventional 30yr fixed quotes of 4.75% to 4.875% for top tier scenarios.  

Many lenders issued negative reprices today as bonds deteriorated.  A precious few continued to offer the same rates all day.  In those cases, expect those lenders to be offering noticeably higher rates tomorrow morning, barring some miraculous overnight recovery in bond markets.  In general, that's not the sort of thing that it makes much sense to bet on at times like this.  The game plan is to duck and cover.  When the coast is clearer, we'll know it and, rest assured, we'll be talking all about it.

This Daily Mortgage Rate Update is provided in partnership with Mortgage News Daily.