Mortgage Rates Took a Sting This Week

For the past few weeks, mortgage rates have been behaving pretty well.

They gradually worked their way down to multi-year lows and, more importantly, they held those levels instead of immediately bouncing back up. That kind of stability doesn’t happen often in the mortgage market.

But markets rarely move in a straight line forever.

This week, mortgage rates moved higher — which means in my weekly series, we’re taking the sting instead of eating honey.

What Happened This Week?

There were a few moving pieces influencing the bond market and mortgage rates.

One of the biggest events of the week was the monthly jobs report on Friday. The headline number for new jobs came in shockingly low compared to expectations. Normally, weaker job growth is good news for mortgage rates because it signals a slowing economy.

But this time the reaction was muted.

Even though the jobs number was very weak, it didn’t provide much relief for mortgage rates.

Oil Prices Are Starting to Matter

Another factor that markets are paying close attention to right now is oil prices.

Rising energy prices can create upward pressure on inflation. And inflation is one of the biggest drivers of mortgage rates over the long term.

Because of that, markets are starting to look ahead and ask an important question:

How much could higher oil prices affect future inflation readings?

The Next Big Event: Inflation Data

The next major economic report is Wednesday’s inflation report (CPI).

Under normal circumstances, lower inflation would be good news for mortgage rates. But right now the market may treat this report differently.

There are a couple possibilities:

• If inflation comes in low, markets may dismiss it as data that was measured before recent geopolitical events and higher oil prices.
• If inflation comes in higher than expected, investors may worry that future inflation readings could be even worse if energy prices stay elevated.

That means the CPI report could create more volatility than usual for mortgage rates.

Watch the Full Weekly Update

In my weekly Honey vs Bee Sting update, I break down what happened in mortgage markets and what it could mean going forward.

And yes — when mortgage rates go up, the bees get involved.

▶ Watch this week’s update