Mortgage rates ticked down for the week, as another tumultuous week of trade news roiled bond markets. Developments in trade discussions between the U.S. and China again took center stage this week, eventually pushing bond yields to multi-year lows after a dizzying stretch of sharp inclines and declines.
Surprisingly, the response from mortgage rates was relatively subdued, as rates fell only marginally despite the substantial decline in yields. This could be because rates are now so low that the demand to refinance has increased notably. Borrowers are often quoted a slightly higher rate to refinance than they'd see for a for-purchase loan, as the deal is less lucrative. Another potential reason for the tame reaction from mortgage rates is market volatility, which usually results in lenders paying more to lock in rates, meaning that higher rates are passed down to borrowers.
Looking ahead, some important economic data releases – including retail sales and a key manufacturing index – are due in the coming days, which should offer investors more signals of how trade tensions are impacting economic growth. Should this trade-related market volatility endure, the risk to mortgage rates remains firmly on the upside, even if bond yields continue to fall.
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