August has been filled with financial headlines stating interest rates have hit their highest levels since the financial crisis of 2008. While this may be true of some rates, don’t be misled by sensational headlines. Not all interest rates move in the same amounts, or even in the same directions!
Mortgage rates are indeed higher than they were at this time last year, but they have not risen as sharply as others, such as long-term bond interest rates. The bond market has taken a beating in recent months (call me and we can geek out on the underlying reasons), leading bond rates (aka – yields) to indeed flirt with 20-year highs.
But the factors currently pushing 30-yr bond yields up are not as impactful on 30-yr mortgage rates. Since 2022, when the era of ultra-low borrowing costs ended, mortgage interest rates have generally been 2-3% higher than a 10-yr U.S. bond yield, much higher than it’s historical average of 1.78%. This difference, known as a “spread”, is dropping back down to more typical levels, so even if bond rates get worse it doesn’t mean mortgage rates will automatically worsen at the same proportions.
You are going to soon see splashy headlines about The Fed speech in Jackson Hole, Wyoming and the US Treasury Secretary messing with bond buy-back programs. These developments could have big ramifications for bond rates, but don’t assume it will equally impact mortgage rates.
If you’re in the market to buy, sell, or refi, and want to know what’s going on with mortgage interest rates, its best to chat with a full-time professional who is on the front lines looking at market conditions every day. Happy to talk rates any time!
Matt Sundermier's Memos on Real Estate & on Life 