This week began with mortgage interest rates moving higher. Not drastically, but definitely higher. For those hoping that the downward movement in rates last week would stick, the markets had other ideas.
Mortgage interest rates are affected by the volatile prices of mortgage backed securities (MBS). An MBS is essentially a bond that relies on mortgage loans as collateral. The bond market had been doing very well during the recent banking panic because investors sought safety, pulling money from stocks and putting them in bonds and cash. MBS and T-bills both were enhanced with cash.
But as the panic has calmed, investors have moved cash out of the bond market and back into stocks. This has put downward pressure on bond prices and upward pressure on yields and rates.