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Mortgage Rates Vault Catastrophically Higher

There is no adequately descriptive language for movement in Mortgage rates today. "Vaulting catastrophically higher" only begins to capture the brutality of the movement. Until today, December 7th 2010 had been the largest day-over-day increase in 30yr rates that we'd logged since 'Black Wednesday'--which was essentially the worst day for mortgage markets in the post-meltdown era (it's a bit chilling to consider the date was 5/27/2009). Today's move is about 50% larger than December's and right in line with Black Wednesday. The conventional 30yr fixed rate with the most efficient combination of cost and payment for a perfect scenario (best-execution) skipped completely past 3.875% and moved soundly into 4.0%. Many lenders are already at 4.125% or higher, but almost all of them moved higher by surprisingly similar amounts (given the size of the move).

WHAT HAPPENED?

There's no elegantly simple 'cause and effect' behind this move higher in rates, and in fact, such cause and effect is typically absent from these sorts of moves (as it was in May 2009). That doesn't mean there's not an underlying reason behind why things are happening this way. In the current case, part of that reason has to do with something we already discussed in greater detail HERE. The remainder of the reason, as I've chosen to explain it today, ends up being quite a long story. If it's hard to follow, that would be understandable, but in that case, please let me know, and we'll continue the dialogue and re-approach it from another, possible more intelligible angle.

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by Matthew Graham