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When Mortgage Rates Snowball Higher And It Becomes An Avalanche

Three weeks ago on June 7th it was the single worst day for mortgage rates in more than four years.   

Because so few homeowners understand how mortgage rates are determined, a day like that may have little context. 

So, let's try to put it in perspective. 

If somebody told you that the stock market crashed, you'd understand.  A stock market crash happens when many more investors are selling stocks than those that are buying. 

Supply and Demand causes prices to plummet.

This is what happened to bonds on that day -- the market had a "crash" because global investors fled the U.S. markets in search of better returns elsewhere. 

In other words, lots of sellers and very few buyers.

Because mortgage rates are based on the prices of mortgage bonds and because Supply and Demand dropped the prices of mortgage bonds, mortgage rates jumped as a result. 

The bond markets have been under selling pressure for several weeks but the first week of June was a psychological price level was tripped and that triggered selling that led to a Snowball Effect.

Then, the snowball became an avalanche.  A big one.  Hence, "the crash".

The 30-year fixed mortgage rate is up 0.625% over 60 days, a 11% increase.  It may not a good time to be floating a mortgage rate.