After hinting at a run lower toward 5 percent earlier this week, Lakeland mortgage rates have reversed course.
It started mid-day Tuesday and the culprit is Basic Economics. Here’s a bit of background to explain why:
Mortgage rates for buying Lakeland real estate, or any other for that matter, are predicated on the price of mortgage-backed bonds (also known as mortgage backed securities). Economics 101 tells us that the price of anything from a bond on Wall Street to a cup of tea in China is based on one thing: The Law of Supply and Demand.
When mortgage bond supplies grow faster than the corresponding demand for them, bond prices tend to fall and when bond prices are down, bond yields move up.
OK, I Get It… But What Does This Mean in Real Life Terms? Glad You Asked!
This week, the U.S. Treasury made its largest weekly auction in history. To the tune of $115 billion in new debt, to be exact. What this means is that before close of business on Friday, $115 billion worth of new mortgage bonds will have been introduced into the market and — so far — demand hasn’t kept pace with the new supply.
Prices for Mortgage Backed Bonds are plunging.
For Lakeland home buyers and mortgage rate shoppers, this news does not bode well, as mortgage-backed debt is less desirable to investors than is treasury debt. Consequently, when treasury debt loses values, mortgage-backed debt tends to lose value right along with it. Not always, but most of the time.
So, beginning with Tuesday afternoon’s auction, mortgage bond related debt supplies have been growing faster than buyer demand.
Bond markets are really getting hammered by an abundance of debt supply, and it’s been a big reason why Lakeland mortgage rates are rising. Oh, and it’s as if I’m channeling Karen Carpenter when I say: “We’ve Only Just Begun!” … As $28 billion is due for auction today!
If demand at the auction is similarly low, watch for mortgage rates to spike again.
As always, if you find a Lakeland mortgage rate that fits your financial situation, you should consider locking it in now. Mortgage rates may come down again, but no one’s crystal ball is working all that well. The news we have at hand is all we can point to… and it’s looking like an upswing in Lakeland mortgage rates or the near future.