Rates rise, then come back...but for how long?

Consumer borrowing costs moved higher yesterday morning but were able to recover from weakness later in the day after stocks experienced a late session sell-off that pushed investor funds back into the bond market. A decline in bond yields led mortgage-backed securities prices higher and allowed lenders to reprice for the better.

A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which generally forces lenders to push mortgage rates higher.

Rates are still at the lowest points in history. What does that mean? It means that based on 60 years of historical data rates only have one way to go, and that is up. But when?

We are in a period of very little economic activity on the calanders. When this happens the prices of bonds and mortgage backed securities take their cue from the stock market. Bad day in stocks, expect small to no gains on interest rates. Good day in the stock market, expect an increase in borrowing costs to keep rates the same (i.e. points). please remember that rates move up a lot faster than they move down.

Please call me with any questions! I hope you have locked in your rate becasue it may be a wild ridde!