Rising mortgage interest rates were perhaps the pivotal reason the Federal Reserve refrained from cutting back on QE3. In the post-meeting communiqué, the Fed clearly said it was unhappy with the hardening in interest rates witnessed after the previous meeting.
Societe Generale Cross Asset Research analyzed the impact of this recent ‘backup’ in mortgage interest rates on mortgage application volumes.
Mortgage interest rate trends
In the chart below, interest rates for the 30-year FRM are plotted alongside the yield on the 10-Year T-Note. One can see the two move with high correlation. Of particular note is the sharp upswing seen in both after the recent low seen in April.
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