There are a few reasons why mortgage rates have been volatile lately:
- Economic Uncertainty: The lingering effects of the pandemic and ongoing geopolitical issues are making it hard to predict how the economy will perform. This uncertainty makes investors jittery, which can cause fluctuations in the bond market, which in turn affects mortgage rates.
- Inflation: Inflation is a measure of how much the prices of goods and services are increasing over time. When inflation is high, the Federal Reserve typically raises interest rates to cool things down. These short-term rate hikes also tend to push long-term rates, like mortgages, up.
- Bond Market Movements: Mortgage rates are closely tied to the yield on the 10-year Treasury note. The yield is essentially the interest rate that investors get for lending money to the government for 10 years. When Treasury yields go up, mortgage rates tend to follow.
In addition to these big-picture factors, there are also some technical reasons why mortgage rates can be volatile. For example, the fact that mortgages can be prepaid without penalty means that lenders charge a premium when rates are low to compensate for the risk of losing out on interest income if homeowners refinance.
Realtor Magazine – “Volatile Mortgage Rates Curtail Contract Signings“
