Mortgage rates were little-changed again today, despite moderate improvement in the broader bond market. Although it's MBS (the mortgage-backed securities that underlie mortgage loans) that have a direct effect on mortgage rates, the broader bond market--especially the 10yr Treasury yield--tends to move at the same time and by the same amount. With 10yr yields down 0.03% and mortgage rates unchanged, that clearly wasn't the case today. So what gives?
Again, mortgage rate movement is up to MBS. Sometimes MBS have better or worse days compared to Treasuries. Today was worse. The reasons are a bit complex, but suffice it to say that market volatility (and uncertainty about where rates may be in the coming weeks and months) is the ultimate culprit. Volatility has a much bigger effect on a mortgage compared to government bond due to the homeowner's ability to DECIDE to refinance or stay put. Those decisions affect MBS valuations, and MBS valuations affect mortgage rates....(read more)