Big-Time Bounce For Mortgage Rates After Hitting Long-Term Lows

In and of itself, today was quite awful for mortgage rates with conventional 30yr fixed rates moving up faster than on almost any other day in the past few years.  As unpleasant as that sounds, if you forget about the past 2 days, the average lender is still offering the lowest rate in well over a year. This is how things often play out when the bond market forces a quick move to extreme rate levels.  For example, several of the biggest drops in daily mortgage rates have followed quick moves to long-term highs. There are other complicating factors driving the swings over the past 3 days especially.  We alluded to these yesterday, but they deserve a bit more attention in light of the ongoing volatility.  Mortgage rates moved much more than the Treasury yields to which they're often compared.  That is not logical at first glance because the mortgage-backed securities (MBS) that determine mortgage rates didn't get hurt nearly as much as Treasuries today.  In other words, mortgage rates shouldn't have moved as quickly as they did based on bond market movement. The issue has to do with the structure of the MBS market.  It would take a tome to explain all the nuts and bolts, but in a nutshell, it means that lenders often end up having more advantageous costs when they offer rates that end in .125% and .625%.   (NOTE: The rest of this is rather technical despite an attempt to keep it as basic as possible.  Don't sweat it if you don't understand it.)