Mortgage Rates Still Unchanged - MBS Continued Lower

Mortgage Rates still remain unchanged, but the Mortgage-Backed Securities (MBS) continued to go lower today, benefiting from a global sell-off in risk-related assets. What's a risk-related asset? In this case, it's a catch-all term for investments that carry greater risk and greater reward, such as stocks and emerging market currencies. When risk-assets get trounced, bond markets are often one of the safe-haven beneficiaries, and stronger bond markets mean lower mortgage rates.

More selling did occur in the stock market today and we saw the 10 yr and MBS prices get better.  Next week the FOMC (Fed’s) meeting is likely going to keep some lid on how low rates may fall next week but we do not expect a huge increase in rates from present levels. It is dependent on the equity markets if the key indexes turn and rally back, with the Fed expected to taper the 10 yr and MBSs will retreat from the present lows.  This fork in the road will take one direction or another.

With the current market, 4.5% remains the most prevalently quoted conforming 30yr fixed rate for ideal scenarios, but 4.375% is not too far down the line as we have inched closer to a new floor.

While unexpected, the improvement in rates is certainly welcome. The question is whether or not it will carry over into next week. The other question is how much markets will even be concerned with what had been shaping up to be a big FOMC (Fed’s) Announcement on Wednesday. If global markets continue in this same vein next week, the momentum could easily overshadow the Fed. The counterpoint and the risk is that such episodes of global risk-aversion and emerging market panic are not uncommon. They happen a few times a year. Sometimes the Eurozone crisis happens and sometimes things blow over. On the occasions where things blow over, rates tend to snap back higher fairly quickly.

In summary, it was good to see rates rally again today, but too early to say if this is the start of a larger move, or a momentary pause in the long term trend towards higher rates, next week will tell the tale.   For the first time I suggested floating today and will do such cautiously - with a quick finger on the lock button, as long as you're aware that quick gains can evaporate equally quickly.

If there is anything I can do to give you advise on financing your next home, give me a call at 314-744-7806, or visit my website www.CallTheMoneyMan.com.