Mortgage Rates Move Up Despite Market Gains

When bonds make "gains," it means that bond prices are moving up.  The price of a bond is like the amount that a lender is willing to pay for the right to collect a certain amount of interest.  The more the lender is willing to pay, the lower that lender's "yield" will be.  Looked at another way, the lower your interest rate would be in the case of a lender making you a mortgage loan.  For that reason, we expect to see mortgage rates fall when bonds are making gains (mortgages are based primarily on bond prices/yields).  But in today's case, rates went a bit higher even though bonds improved.

As is often the case, the discrepancy results from the timing of bond market movement over the past few days.  Bonds weakened yesterday and rates logically moved higher.  The catch is that bonds continued to weaken after most lenders set mortgage rates for the day.  The move was big enough that today's bond market recovery wasn't quite enough to get bonds back to the better levels seen yesterday morning, thus leaving a small but logical gap between today's and yesterday's mortgage rates.  

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