Mortgage Rates have stabilized this morning after moving higher at a moderately quick pace over the past 2 days.  To be sure, today’s rates are modestly higher than those seen at the end of last week, despite numerous headlines to the contrary. The headlines in question are based on Freddie Mac’s weekly rate survey which is published on Thursday morning, but tends to capture the “previous” week-over-week rate movement between Monday and the previous Monday.

Why drives mortgage rates though?  Rates are dictated by the bond market.  As bond prices fall, yields rise, and higher yields coincide with higher rates (indeed, “yield” is simply market jargon for “rate”).  

While motivations to buy and sell bonds can vary immensely, the law of supply and demand applies just as it would to almost anything.  In other words, if buyers of bonds decide to be less aggressive, bond prices would fall and rates/yields would rise, all other things being equal.

Less aggressive purchase demand is exactly what we’ve seen in the market so far this week.  There are at least 2 obvious reasons for this.  First, Tue-Thu saw a regularly scheduled round of Treasury auctions.  Even though mortgage rates aren’t based directly on Treasuries, they have a strong correlation. 

The second reason is a speech from Fed Chair Powell tomorrow.  He’s expected to comment on the Fed’s approach to reducing its massive bond buying efforts in the near future (aka “tapering”).

Markets have a pretty good read on Powell’s stance, but there’s a risk that Powell says something that accelerates the perceived time frame for tapering.  If that happens, it would imply lower “demand” in the supply/demand equation.  In other words, the sooner the Fed tapers, the sooner there is additional downward pressure on bond prices and upward pressure on rates.  

If, on the other hand, Powell says the Fed is slowing its roll in response to covid concerns and recently weaker economic data, the buyers who sat on the sidelines so far this week could come back.  In that case, rates could recover a bit.  Either way, the risk of volatility is increasing.  Today just happened to be the day where bonds finally leveled off (perhaps not a coincidence given the end of the Treasury auction cycle and the proximity to the Powell speech).


Keith Murphy Branch Manager – Essex Mortgage NMLS #330827

Direct: 714-309-1140


About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.