It is more than a little ironic that I cautioned yesterday about interest rates moving upward and doing so quickly, because it happened yesterday. Across the board (by that I mean conventional, FHA, VA, etc.) rate sheets took a hit of about .375%! That is a HUGE jump in one day. That means if we were quoting 4.875% in the morning, by the afternoon we were quoting 5.25%. I would like to think that this is just a knee jerk reaction to a horrific bond offering yesterday, but I know it is more than likely going to continue. Why did this happen yesterday??
There are several factors. However the likely culprit is a lackluster 5 year bond offering. At 1PM eastern, the Treasury Department auctioned 42 Billion dollars worth of 5 year notes. When our government lacks the cash needed for spending, they must find it from investors (China!). They do this by selling debt such as bonds and t-bills. The success of any auction is always gauged by demand....and there wasn't any! This had investors jumping out of the bond market (which drives mortgage interest rates as Mortgage backed Securities are tied closely to bonds) which drove the prices for Mortgage Backed Securities in the toilet. The less the bonds are worth, the higher rates go to attract buyers. Bad Situation.
IF YOU HAVE BORROWERS WHO HAVE NOT LOCKED, YOU NEED TO ADVISE THEM TO DO SO. With FED support of the mortgage markets ending on 3/31, it is doubtful rates will rebound.
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