Mortgage Rates Moved Positive Again

Mortgage rates did move again in a positive direction, even though the Mortgage Backed Securities (MBS) did take a bit of a hit that retreated some of the gains we started off with in the morning.  With that, the most prevalently quoted conforming 30yr Fixed for the best-qualified borrower’s remains at 4.375%.

There was not a lot of movement in the stock or bond market ahead of the Crimean referendum on whether to join Russia or stay in the Ukraine. The general consensus as the weekend nears is that the vote will favor joining Russia, the issue is what will he west do and how will Putin respond? Yesterday investors and traders set their positions, today not much movement in the markets.  Although markets reacted yesterday with safety moves away from stocks and into treasuries, as we noted previously, unless there is a military event markets will not be overly concerned about sanctions unless those sanctions harm Europe’s economic outlook.

With the improvement in mortgage rates – we have seen the roller coaster that we experienced a great deal in early December. Interest rates tend to benefit from what most would consider to be "bad stuff" -Weak economic data, financial contagion, and geopolitical instability are just a few of their favorite things. 

Right now the mortgage rates positivity is almost exclusively about the situation in Ukraine.  In large part, the bond markets that most directly affect mortgage rates have avoided their normal focus on economic data and simply have kept pace with the movements in broader financial markets.

Those movements are fairly simple in times like this.  When news breaks, markets interpret it either as calming or inflammatory with respect to the situation at hand.  If soothing, financial markets will move "toward risk," and vice versa, meaning that headlines that cause concern might results in stock prices and interest rates moving lower.

What will happen next week?  It all depends what happens this weekend with Crimea's referendum, and the several dominoes that depend on it.  These questions need to be answered before we can even begin to think about the impact on financial markets and interest rates.  Next week the Feds will meet and there is little doubt that there will be another taper of $10B.  One thing is for sure is that much of the recent drop in mortgage rates is due what is happening overseas – something that cannot be counted on for the long term.   

In summary, my philosophy of “Pigs Get Fat, Hogs Get Slaughtered” should be taken seriously.  I do feel there is much more room for mortgage rates to rise then falls at this point. I do think the situation does get worse before it gets better but I feel you have much more to risk than gain at this point.  If you have not locked in at this time, all I can say is if you want to continue floating – do so with caution.