Mortgage rates surge higher on Trump victory

Tuesday's red wave pushed yields higher. The 30-year fixed mortgage popped above 7 percent. It's since backed off to just below that level ahead of the Fed's rate cut. But Diana Olick, this is, I'm sure, not what the Fed was expecting when they cut by half a point six weeks ago. No, certainly not. Look, rates have been on a tear both this week and in the last few weeks. Take a look. The average on the 30-year fixed hit its last low on September 11th. That was just before the Fed made its first rate cut. Mortgage rates don't follow the Fed. Instead, they loosely follow the yield on the 10-year Treasury. So instead of going down, rates went steadily up as we saw more positive indicators in the economy. Then, of course, bond yields soared yesterday and rates jumped even higher. But today, they did come back down a bit to 6.98 percent. OK, so for a homebuyer buying a $400,000 home with 20 percent down on a 30-year fixed, their monthly payment today is about $215 more than it would have been in September. We have recently seen homebuying demand higher, pending home sales up 7 percent in September from August, despite rates turning higher, that according to the realtors, and Redfin is reporting pending sales were up 4 percent year over year in the four weeks leading up to the election. Still, the big builder names took the bond sell-off yesterday hard. They are back on the rebound today in advance of the Fed. A 25 basis point rate cut is widely expected, but again, mortgage rates don't follow the Fed, as we said. They follow more what the Fed is thinking and feeling about the future. So any swing in mortgage rates will be a reaction to the commentary following that announcement. Kelly. All right, Diana. Thank you. Diana Olick.