Mortgage Rates Aren’t Doing Much: Here’s Why

July 12, 2021

Orion’s brokers, and your clients, see that the economy is reopening. We’re traveling, eating out, and going to movie theaters, concerts, and ballgames. In England, Wimbledon was packed last weekend. Normally an expanding economy leads to higher rates. Not this time… At least not yet. Why not? The basic answer is that the “experts” thought the economy would have been doing better.


Mortgage rates take their cue from Treasury rates, and those rates continue to drop.(Generally the 10-year Treasury tracks 150 to 200 basis points below the 30-yearmortgage rate.) The drop in Treasury yields since late May, and especially in the last few weeks, is quite a curveball. Economists expected mortgage rates to keep climbing this year, but not so far, and this is helping your borrowers!


So why aren’t rates moving? Inflation is relatively steady. Growth is strong and the economy is just starting to fully reopen, but many “experts” still expect to see a rebound in Treasury rates, so any mortgage rate declines will likely be temporary.


The overriding reason, however, is that the economy is not doing as well as was expected. One of the drivers of the lack of activity is that we’re seeing a labor shortage, not a job shortage. There are “help wanted” signs everywhere, but service and hospitality businesses are having trouble attracting employees back to work. There are an estimated 9.3 million job openings.


And the economic rebound is being hampered by that. To spell it out, if your client wants to go to the local diner and spend money on lunch, but the restaurant doesn’t have the staff to be open for lunch, then what? And that scenario is being carried out everywhere, in many sectors of the economy. Want to buy a car, but there are none due to a chip shortage? Want to buy a house but no one is selling?


No one owns a crystal ball and can see into the future. Mortgage rates rose from the all-time lows set in January, but now have dropped back down. So it is still a good time to refinance your client’s mortgage with Orion, and we recommend having a conversation with one of our AEs about Orion’s new programs.

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