Mortgage Watch Report

Mortgage Rates and bond market volatility has been extreme, this week made everything else look tame by comparison.  While it will never show up in weekly survey numbers, the 3-day jump between last Thursday and this Tuesday was one of the biggest on record, taking the average 30yr fixed quote from 5.55% to 6.28% by yesterday afternoon.  The pace of that spike is nothing short of staggering considering 5.55% was already near their highest levels in more than a decade.

The drama began with last Friday’s Consumer Price Index (CPI), a key inflation report that showed prices rising faster than expected. Inflation is biggest concern for the Fed at the moment, and the biggest reason for their increasingly aggressive efforts to push rates higher in 2022.

CPI alone wouldn’t have been worth this much drama were it not for the looming Fed announcement on Wednesday afternoon.  Further complicating matters was the fact that the Fed refrains from public comment on monetary policy in the 12 days leading up to a policy announcement. In other words, markets were flying blind as to what the Fed’s response might be to the CPI data, and imaginations ran wild.

On Wednesday, The Fed raised the Fed funds rate by 75bps and observers would “think” this would drive rates even higher but it did not?  Mortgage Rates and Treasury Yields actually improved after the announcement, albeit ever so slightly.

This question speaks to a popular misconception about the Fed and mortgage rates.  In short, when the Fed hikes rates, it does NOT mean that mortgage rates go higher (except for the small contingent of loans that are actually tied to an index that moves with the Fed Funds Rate).  In fact, it frequently means that rates move lower.  

Why would a rate hike lead to lower rates?

The short answer is that the bond market (which dictates mortgage rates) has almost always already adjusted for the rate hike ahead of time.  By the time the Fed actually hikes, it’s old news to the market, and there’s a sense of relief as traders have one less uncertainty to deal with.

Looking ahead there are plenty of economic headwinds to contend with, therefore locking is recommended as soon as escrows open.





















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.