Home Loan Rates Ticked Up

March 16, 2020

Last Week in Review: Rate Movements Explained

This past week was a head-scratcher as home loan ticked up slightly week over week despite the 10-year Note yield hitting a historic low of 0.31% and Stocks enduring heavy losses. Typically, when Stocks drop, so do rates -- especially after historic Stock losses like those this past week.
So, what happened?
Home loan rates are determined on the pricing of mortgage backed securities. Due to all of the recent refinance activity as a result of the low rates, the Bond market was flooded with an enormous supply of Mortgage Bonds.
When additional supply comes into any market, prices can move lower, and that is what we saw last Monday as mortgage backed securities touched a six-year price high and started to reverse lower.
Once Mortgage Bonds started to drop in price, thereby increasing rates, something very interesting happened. The sell-off in Mortgage Bonds really gained steam causing a further bump up in rates.
Why did mortgage backed securities drop so fast?
Mortgage backed securities carry prepayment or refinance risk, which limits how fast rates drop when they are dropping. The opposite is also true. This means when rates start to rise, the prepayment or refinance risk goes away causing a sharp move lower in prices and higher in rate.
Bottom line: home loan rates remain within a whisker of the best levels seen earlier in the week. And there is an old saying, "the cure for higher rates, is higher rates," meaning at some point as prices drop and interest rates tick up, investors will buy Mortgage Bonds and stabilize interest rates.

Government Agency Approvals

FHA Non-Supervised Mortgagee Approval #:
24751-0000-5
VA Automatic Lender Approval #:
902324-00-00

Mortgagee/Loss Payee Clause

Carrington Mortgage Services LLC
ISAOA/ATIMA
P.O. Box 692408
San Antonio, TX 78269-2408

Industry Links

Loan Limits LookupMortgage Letters
This information is provided for your convenience and Carrington Mortgage Services, LLC makes no warranties concerning the accuracy or completeness of any of the information. This is not financial or legal advice and should not be taken as such. This information is for mortgage professionals only and is not intended for distribution to consumers.
CAREERSINVESTORSABOUT USCORRESPONDENT
An Equal Housing Opportunity Lender. Copyright 2007 - 2023 . Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites 110 & 200-A, Anaheim, CA 92806. NMLS ID # 2600. Toll Free # 800-561-4567. All rights reserved. Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines.  Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site: www.nmlsconsumeraccess.com.

The content of this website is intended for licensed third party originators or brokers only and may not be duplicated or disseminated to the public. Carrington Mortgage Services is one of the leading wholesale mortgage lenders.

Government Agency Approval | FHA Non-Supervised Mortgage Approval #: 24751-0000-5 | VA Automatic Lender Approval #: 902324-00-00

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram