How Fast Rates Can Change

Last Week in Review: How Fast Rates Can Change

Right now, the biggest news story to follow is the U.S. and China trade negotiations.

This past week, home loans started inching higher but were "saved" momentarily midweek when reports came out suggesting a delay of a "phase one" trade deal signing. Remember that Bonds and home loan rates like bad news, so a disruption or delay of the trade signing was the reason for rates to improve off the worst levels midweek.

However, come Thursday, word that both the U.S. and China would roll back tariffs as a deal gets put together was very good news which pushed Stocks to all-time highs at the expense of Bonds and home loan rates.

Even with the recent uptick, home loan rates are at the same level they were at back on July 31st when the Fed cut rates for the first time in 10 years. The Fed has since cut rates two more times and home loan rates have not improved any further.

A word of caution: long-term rates like mortgages can move up very fast, and it is in a complacent environment like today when things suddenly change. Using history as an example, the 10-year Note yield has traded at 1.40% or lower on three separate occasions in the past seven years. In the two previous times -- 2012 and 2016 -- the 10-year yield quickly spiked to 3% and 2.75% respectively in just six months. This sharp move higher in yield also weighed on home loans, which also rose sharply.

Bottom line: for those considering a new mortgage, now may be an opportune time before this window closes.