Mortgage Rate Update and Why They Changed

Good Evening,

The Consumer Price Index (CPI) was released today and I would like to take this opportunity to share some mortgage rate information with you.

Mortgage rates are highly correlated to the 10-year Treasury yield, when the 10-year Treasury yield rises generally so do mortgage rates. The opposite is also true, when the 10-year Treasury yield drops, generally so do mortgage rates.

Unfortunately the 10-year Treasury yield increased today and according to Mortgage News Daily the 30 Year Conventional fixed rate mortgage rose by 0.04% today to 6.98%. Here's a simple breakdown of why this happened:

Inflation Data: The Consumer Price Index (CPI), which measures the average change in prices over time that consumers pay for a basket of goods and services, showed that prices increased by 4% in May. This is a bit slower than the 4.9% increase we saw in April. Initially, this slowing down of price increases led to a decrease in yields (the return on investment for bonds). However, with the Federal Reserve (the Fed) set to make an announcement about their policies, investors are preparing for potential changes.

Federal Reserve's Policy Announcement: The Fed has a big influence on financial markets. Recently, traders have been expecting the Fed to keep interest rates steady. In fact, the chance of this happening has increased from 79.1% to 97.1%. However, there's also a 63.8% chance that the Fed might increase interest rates slightly in July. This uncertainty has led to some fluctuations in yields.

Investor Caution: Investors have been cautious ahead of the Fed's announcement and another inflation report. This caution has led to some changes in the market, including the increase in yields.

Bank of England's Stance: Across the pond, the Bank of England has indicated that they're likely to increase their interest rates because the job market is strong and food price increases are slowing down. This decision can influence what happens in the U.S., including the rise in our 10-year Treasury yields.

Supply of Bonds: On June 13, the Treasury planned to sell $18 billion in 30-year bonds. When more bonds are available, this can also contribute to an increase in yields.

In conclusion, the rise in Mortgage Rates today, June 13, 2023, was influenced by changes in inflation, expectations about what the Fed will do next, caution among investors, decisions made by the Bank of England, and an increase in the number of bonds available for purchase.

As always, please feel free to contact me with any questions at all, I’m always available for you!