Mortgage Rates Gave and Then Took Away

Mortgage rates continued to head in the right direction in a very volatile way today as we have now gotten to a new low point in the past 20 months.  The most prevalently quoted conforming 30yr fixed rates for top tier borrowers are now at 3.75% with 3.625% coming in with fees.

More screaming volatility today in the US Stock indexes - more evidence that the equity markets are not looking good so far this year.  The models are bearish as are most of the momentum oscillators.   The DJIA traded up 282 points this morning then selling ripped those gains out and sent all key indexes lower on the day. One strong crutch for treasuries and MBSs is the coming fall of global equity markets. This year isn’t going to be a good one compared to last year as finally investors around the world are letting reality take over on the poor quality of jobs, collapsing commodity prices led by oil, the inability of central bankers to influence inflation targets, earnings forecasts from analysts that corporate earnings won’t be as strong this year, and closing in on understanding how serious the European economic decline is and will become worse through this year.

Rates have certainly been trending lower since the beginning of 2014. That trend has much to do with Europe, and until the trend in European economic concerns reverses, the trend in rates is likely to continue. The tricky part is that the reversal could begin at any time and we wouldn't really be able to identify it without some hindsight. Coming up in the middle of the night tonight, Europe will get an important piece of news in the form of a court ruling that will speak to the European Central Bank's ability to stimulate the economy as it sees fit. While it could just as easily result in very little drama, this is one of those periodic events that have the potential to cause current trends to accelerate or seemingly reverse course.

In summary, historically when bond rallies are based on global events more so than data in the US, they can vanish very quickly.  This scenario is no different, in my opinion.  Bonds and mortgages showed great resilience today, and I would be lying if I said they were not showing great signs of strength.  At these levels, however, I may be suggesting to float cautiously, but why not grab this rate and run with it, as the risk is too much versus the reward.

Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit my website at www.CallTheMoneyMan.com. I have access to real time Wall Street data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.