Last week was a tumultuous one for mortgage rates, with Friday marking the worst day in over a year in terms of day-over-day movement. However, it’s important to note that October 19th, 2023 still holds the record for the worst day in decades in terms of outright levels, with 30-year fixed rates surpassing 8%. Monday only added insult to injury, as rates experienced another sharp increase, pushing the average top-tier conventional 30-year fixed rate back over 7% for the first time since December 12th.
The catalyst behind these rate fluctuations was an upbeat economic report. On Friday, it was the big jobs report that caused the damage. Today, it was the ISM Non-Manufacturing PMI (ISM Services) that sent rates spiraling. While not as well-known as the jobs report, ISM Services is considered a supporting actor on the economic stage. When it deviates significantly from expectations, rates tend to react.
Currently, rates are more sensitive than usual to economic surprises, especially after last Friday’s events. The ISM data released today was only moderately stronger than expected at the headline level. However, certain components of the report, such as employment and prices, were much higher than the previous release.
Following the release of the data, the bond market, which dictates mortgage rates, immediately weakened. This prompted mortgage lenders to set their rates much higher compared to Friday afternoon. As a result, in just two business days, the average lender has seen an increase of over 0.40% in terms of top-tier 30-year fixed rates compared to Thursday afternoon.
The impact of these rate increases is significant for potential homebuyers and those looking to refinance their mortgages. With rates surpassing 7% for the first time in months, affordability becomes a concern. Higher mortgage rates mean higher monthly payments, potentially limiting buyers’ purchasing power and affecting the overall housing market.
It’s important to keep a close eye on economic reports and market trends in the coming days and weeks. Any further surprises or fluctuations could continue to impact mortgage rates, making it crucial for borrowers to stay informed and consider their options carefully.
In conclusion, last Friday and Monday saw significant increases in mortgage rates, marking the worst day in over a year and surpassing 7% for the first time since December. The catalysts behind these rate movements were an upbeat jobs report and the ISM Non-Manufacturing PMI. With rates being more sensitive than usual to economic surprises, borrowers must remain vigilant and consider the potential impact on their mortgage affordability.
