Mortgage rates are at the highest levels since November of 2014. Interest rates around the globe have moved higher during the first half of this week.
As we know changes in US mortgage rates tend to correlate to changes in yields on the US 10-year treasury note. Lately, changes in the US 10-year treasury yield have correlated to changes in the yield on the German 10-year bund. Therefore, changes to mortgage rates are closely correlated to changes in German interest rates.
As recently as April the yield on the German 10-year bund was ~.10%. Yesterday it touched as high as .99%. Over that time mortgage rates have increased by roughly .375%.
Yesterday the president of the European Central Bank stated that “the markets should get used to volatility.” His comments caused interest rates around the globe to surge higher.
Let’s not forget that it’s jobs week and momentum can change with the single release of the all-important monthly report. The markets are currently expecting 235,000 new jobs created in May. Wednesday’s ADP private employer results showed 201,000 new jobs. Typically speaking a number south of the expectation bodes well for rates and vice versa.
Given that rates have increased so sharply in the past three days I am going to recommend floating to see if we see a brief reprieve heading into next week.
Current Outlook: floating