Mortgage Rates Explode Higher by 1/8 Point Three Times in March

Mortgage rates rose by 12 basis points (BPS) or more for the third time in […]

Mortgage rates rose by 12 basis points (BPS) or more for the third time in March. A basis point is 0.01 percentage points.

A quarter-point hike is 25 BPS and one-eighth is 12.5 BPS.

If you received a mortgage rate quote any time in the past few days or weeks, unless it was at the end of the business day on Monday, March 14th, you’re looking at a relic of a bygone era. Print it out and hang it up in the halls of Woulda, Shoulda, Coulda.

In the very best cases, some lenders are only .125% higher in rate (to put that in perspective, few individual days see bigger moves). Other lenders are closer to 0.25% higher. That puts today in a league with fewer than 10 players over the past decade. The average conventional 30yr fixed rate is easily up and over 4.25% now, with lenders anywhere from 4.375 to 4.625% depending on the scenario.

If you failed to lock in a good mortgage rate earlier this year, it’s too late now.

Since the beginning of the year, rates have risen from 3.27% to 4.41%. That a jump of 1.14%, just over one-and-an-eighth points.

Fed Hikes Rates Wednesday 

The Fed hikes rates on Wednesday by a quarter-point.

Let’s look ahead to June.

Target Rate Probabilities for 2022-06 as of 2022-03-14

Looking ahead three months, CME Fedwatch analysis shows traders expects the Fed to be in the range 1.00% to 1.25% at the conclusion of the June FOMC Fed meeting.

The Fed meets on Wednesday then again in May and again in June. Traders expect a half-point hike in May.

Will Mortgages Follow Fed Hikes?

Probably not. The yield curve is starting to invert.

That’s the good and bad news. Mortgage rates will likely top a little higher, but the Fed is hiking into a recession.

Could it Get Worse?

Yes, especially if the Fed starts unloading its balance sheet starting with mortgage-backed securities (MBS).

Some Fed presidents want the Fed to shrink its balance sheet instead of hiking. Others want the Fed to do both.

Recession

Dumping MBS in the midst of a Fed tightening effort has never been tried. Thus we cannot say for sure what it would look like, but it would probably be very messy.

So, I suspect they won’t.

Regardless, a recession is on the horizon, but few see it yet.

Q: The Fed is hiking just as demand is weakening and a war in Ukraine is killing Europe. What can go wrong?

A: Not much other than a continued stock market crash, a housing slump, and a global recession.

Bubbles Will Pop

If you think the Fed can fix decades of easy money and reckless Congressional spending while not remotely understanding inflation, you are only nuts.

Please note Most People Have No Idea How Much Stocks are Likely to Crash

As a result of these bubbles popping, expect a big deflationary crash. Then things will depend on how reckless the Fed and Congress get.

And don’t forget about global currency wars.

For discussion, please see Unprecedented Actions May Have Just Started a Global Currency Crisis

Finally, please see a BRIC House and an International Dollar Default by the United States.

This post originated on MishTalk.Com.

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The original article can be found at: Mish Talk - Global Economics