Mortgage rates fell again this week, continuing to withstand upward pressure imposed by financial markets. Progress around the rollout of a COVID-19 vaccine and reported advances in discussions surrounding a potential next wave of fiscal relief have buoyed investor optimism of late, leading bond yields to trend higher. However, the upward movements in mortgage rates that would normally follow such a development haven’t occurred.

Instead, mortgage rates actually trended slightly downward this week, falling back to just above their lowest levels ever recorded. Many factors are contributing to this unorthodox movement, but the relatively muted changes in mortgage rates is mostly thanks to enduring demand for loans. Demand for mortgages has been so strong for so long, that to stem the tide of borrower requests lenders have been forced to keep rates above where the market would normally indicate. Since mortgage rates didn’t fall in recent months by as much as bond yields would suggest they should have, there is now less pressure on them to rise once bond yields start to increase — and it’s likely that this dynamic should continue.

A surge in bond yields – something that would prompt meaningful upward movement in rates — appears doubtful given the fact that any fiscal relief would likely be in line with investor expectations.