Is the worst over for the mortgage rate hike in early 2022?

0

2022 started at a wrong departure for the bond market and therefore mortgage rates. The pace has been aggressive, with the average lender seeing an increase of more than a quarter point in one week and a 3/8 point increase in two weeks. The most common 30-year fixed quotes are now in the 3.625% range, compared to 3.25% at the end of December.

We’ve seen the rates rise, rise faster, but very rarely. When that kind of momentum is underway, we open the proverbial hatches and wait for proof that the skies are clearing. This will usually take the form of smaller losses and, possibly, a repel in the other direction. The first two days of this week have potentially fulfilled this role.

Yesterday was a bit more ambiguous. Rates hit their highest levels since the pandemic began earlier today, but the bond market stabilized At the end of the day. Today was a little more encouraging. Bonds lost ground again in the morning, but less than yesterday. They improved regularly from mid-morning following Fed Chairman Powell’s testimony to Congress.

Overall, today’s friendly rebound in the bond market is not something special, but it was a nice contrast to the weak AM. It also gave us our best example of a corrective rebound since the serious rate hike started last week. In the afternoon, almost all of the lenders issued a positive delay, offering rates lower than that morning’s initial offers. For context, this leaves the average lender still significantly higher than Friday, but slightly better than yesterday afternoon.

The big question is whether the worst is now over for this sudden move to higher rates. The answer is a “maybe!” final. It could even be “probably”. Unfortunately, that doesn’t mean rates can’t go up, just that the pace can moderate from here. Realistically, if it were possible to know what the near-term future held in rates with significant precision, traders would already trade accordingly. Thus, the market is always doing its best to adapt to expected future movements.

We’ve seen similar rate spikes in the past that died down for a few days before picking up again. We have seen other examples where those few days are just the start of a larger stability. It is still much too early to decide which version we are dealing with right now.

Share.

Comments are closed.