Mortgage Rates Up, Continuing Stretch of Modest Weekly Oscillations

Mortgage rates trended higher this week as economic data and pandemic-related developments paint a conflicting picture of the economy’s path forward.

Bond yields, which generally dictate the course of mortgage rates, have risen steadily for the better part of the last few months – and while the longer-term trajectory for yields and rates is almost certainly upward, the near-term outlook is currently at a bit of an impasse. On one hand, the economy is showing signs of continued recovery – service sector activity continues to improve, local economies have begun to reopen, and COVID-19 case volumes have fallen from their post-holiday highs. On the other hand, the labor market remains deeply wounded, as concerns about new virus variants have escalated and the fate of the next wave of fiscal relief is currently in flux. Markets will be looking for definite signals of the economy’s direction the coming weeks and an important gauge of this will be the January jobs report due this Friday.

If the report reflects renewed improvements in the labor market, and especially if it coincides with meaningful progress regarding more fiscal relief, then mortgage rates could move upward quickly. If not, the pattern of modest weekly oscillations in mortgage rates is likely to continue in the coming weeks.

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