Mortgage rates hit another multi-month high despite recovering in the afternoon

Mortgage interest rates are typically updated only once a day. Lenders set rates based on trading levels in mortgage-backed securities (MBS), which are essentially bonds tied to cash flows from groups of mortgages. MBS move throughout the day in much the same way as US Treasury bonds. If they move enough, lenders can make mid-day changes to the rates they published earlier in the day.

Today started with government bond yields in higher territory and MBS in weaker territory. That almost always means that the mortgage interest rate will be higher than the day before, and that is true! The average lender increased from 7.00% to 7.08% in a top scenario with a fixed term of 30 years.

Bonds improved enough in the afternoon for lenders to revise their prices. That brought the average back to 7.03%, which is of course still slightly higher than yesterday’s 7.00%. In short, today’s interest rates hit another multi-month high.

Expect volatility potential to remain high through at least the second half of next week, with every day between now and then risking quite substantial moves. The riskiest days are next Friday, next Wednesday and next Thursday due to the jobs report, the election and the Fed announcement.