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After two straight months during which mortgage lenders were apt to let morning rate sheets stand, volatility is returning to mortgage rates.  Over the last 60 days, on average, lenders have released mid-day, interest rate updates on 3 days of the 5-day workweek.

It's making the process of shopping for mortgages a little bit more challenging.

If you didn't know, life has been more than a little weird in the mortgage world lately.  See, all of our lives, we've been taught that mortgage rates moves based on mortgage bond market market.  When mortgage bond prices rise, mortgage rates are supposed to fall.  This is how bonds work.

But markets aren't working the way they're supposed to.

Since mid-March, mortgage rates are only loosely tracking mortgage bond prices.  This is because lenders are flush with stimulus-led business and, therefore, don't need price their loans with razor-thin margins -- there's plenty of loans to go around. 

As a result, the country's biggest banks are turning extra-strong mortgage-related profit and feeling less of a need to be competitive.  The best example of this is a Bloomberg story in which one particular bank admits to inflating its mortgage rates just to slow the flow of new applications.

So, for as long as the banks don't "need" new mortgage business, the 4.500 percent, zero-point rates on which Cincinnati homeowners hang their respective hats is likely remain at bay.  Banks may get that price direct from Wall Street, but they're loathe to pass it on unless they have to.

There is some good news to glean, however. 

Last Wednesday, mortgage rates had their worst 1-day performance in as long as I can remember.  Some friends are referring to it as Black Wednesday.  Over a 90-minute period, mortgage rates rose 5/8 percent as mortgage markets sold off like Frozen Concentated Orange Juice futures.  Lenders passed those changes on post-haste.

It was a 5-rate-sheet day.

But then, on Thursday and Friday, as the mortgage bond market recovered from some of its losses, pressuring rates lower, lenders published 6 separate rate sheets over 2 days.  This is a signal that banks are passing some of the "winnings" back to consumers. 

Last March and April, we didn't see much of that.

Rates will continue to be volatile on a day-to-day basis -- at least until such time as the economy has regained its footing and the government has withdrawn from its market management role.  In other words, it's going to be like this for a while.

In May, on average, mortgage rates changed every 3 hours, 37 minutes.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.