Mortgage Rates Jump Back Up, Continuing Wild Stretch of Volatility
Mortgage rates rose sharply in the past week, reversing recent declines and continuing a torrid stretch of wild swings that has gone on for the better part of the past three weeks.
The mortgage market is facing the next phase in what is continuing to evolve into a perfect storm. Aggressive interventions by the Federal Reserve initially helped address some volatility in rates brought upon by underlying strains in the secondary markets for mortgages. And actions taken by other government agencies offered support to many borrowers who were at risk of missing monthly payments because of coronavirus impacts. But these well-intentioned measures may have produced new challenges for mortgage lenders and servicers, who now face the prospect of short-term cash shortages due to missed payments and disruption to usually reliable risk hedges. These new constraints have manifested themselves in mortgage rates that remain all over the place on a day-to-day basis and no longer follow their usually rock-solid and largely predictable relationship with Treasury yields. Demand for unconventional mortgages – namely jumbo loans – is also drying up on the secondary market.
Taken together, it’s clear that absent any pointed relief for lenders and servicers, mortgage rates are likely to remain somewhat high and wild swings in rates will continue in the near future.”
