Mortgage Rates Did Not Move - But Are Moving Higher Soon

Mortgage Rates again did not move, but every indication that they may move tomorrow was set up following new Fed Chair Yellen's first scheduled testimony before the House Financial Services Committee.   With the Chairwoman’s report distributed at the beginning of the morning when the bond market opened, most of the damage was done as Mortgage Back Securities (MBS) took a dive and never recovered.   The most prevalently quoted conforming 30yr fixed rate for the very best borrower scenarios remains at 4.375% with 4.25% and 4.5% both still fairly close.

As expected, there were no big surprises in Yellen's testimony, but that was precisely the problem for bond markets - and hence mortgage rates - which are directly affected by bond market activity.  As we feared, we were waiting to see if Yellen would confront the weaker employment data, and because she did not do so, the bond markets lost ground and mortgage rates moved higher. 

Unfortunately, this is not what we wanted to see in the mortgage industry as the rates now have a little bit of movement upward after hitting the new floor last week.  When we did not see a shifting or major movement after the report last week, everything fell in the lap of Yellen.  Nothing she said dictated that the rates should move higher – it was the expectations that were set high by the market that never materialized. 

In summary, Yellen’s comments were exactly as I predicted that she would not deviate from previous policies.  Unfortunately, she did not give any clear direction on which way she was leaning after the lower reports the past few months and we saw the reaction continue with the Mortgage Backed Securities (MBS) continue its slide pushing mortgage rates higher.  We may have seen the floor last week, and unless we see some kind of major economic report that is negative in a big way, rates will continue to move higher. That is until the market makers decide otherwise. Maybe a third bad jobs report will turn the tide. My suggestion is to lock and not look back.

If there is any questions you may have to your financing, please give me a call at 314-744-7806, or visit me on my website at www.CallTheMoneyMan.com.