You’re On Vacation, But Mortgage Rates Aren’t
The week between Christmas and New Year’s Day is notoriously slow in a lot of industries. Many Americans take vacations or time off from work.
Those that do go to work are often less productive.
On Wall Street, fewer “workers” means that liquidity leaves the market. With fewer buyers and fewer sellers of a given security, its prices can move more wildly than normal.
For homebuyers, this means that mortgage rates can move more wildly than normal, too. Mortgage rates are derived from the price of mortgage bonds, a security.
This is one reason why, after touching their best levels in two years, mortgage rates charged higher with force last week. This move was fueled partly by renewed fears of inflation; partly by the season.
Between Wednesday, Thursday and Friday last week, mortgage rates had risen 0.375% on most products. This morning, the trend continues.
Movement at this speed is atypical but this week is atypical, too.
Expect that mortgage rates will show the same volatility until January 2, 2008. With more traders showing up for work, liquidity will return to markets, stabilizing mortgage rates.
