The bond market is sinking again this morning, sending mortgage rates up yet again.

As you can see from the chart below, the bond has been on a downslide which has sent mortgage rates soaring up about .50% just in the last 13 days! 

If you have clients that are refinancing and waiting for rates to "come back down," they may be very disappointed and miss the bus. 

Remember, everything the gov't is doing by purchasing bonds and stimulating the economy is designed to help business start moving again.  When that happens, and it will to some degree, the stock market will go up and investors will pull their money out of low return bonds and gamble on higher returns in the stock market.  This will force the bond issuers to have to increase the rate of return, which is the money they have to make loans.  If they are currently selling the 3.5% bond to investors and giving mortgage rates of 4.25%, what do you think will happen if they have to start offering the 4.5% bond?  That's right - mortgage rates at 5.25%.  It's not that linear, but it gives us common folk some perspective as to what mortgage rates will do if the stock market becomes attractive to investors. 

Quick Lesson On Inflation:
Inflation is the enemy of low mortgage rates.
A general description of inflation occurs when sellers of goods and services feel the market will pay a little more for their product, thus prices are increased (inflated).  This means the higher costs have a ripple effect throughout other businesses that are somehow linked to that increase, and have to increase their prices as well.  Consumers start to pay more, and the stock market goes up because profits will increase.  As I said above, investors won't be satisfied with low returns in the bonds when stocks are rallying, so a higher price will be required to lure the investors back to bonds, sending mortgage rates higher. 

Hope this is helpful.  Have a great day.

- Doug