Volatility Continues as Mortgage Rates Increase

Mortgage rates moved moderately higher on average today. Recently high volatility in financial markets continues driving different lenders adjusting rates their by different amounts, and sometimes even in different directions. For instance, some banks I deal with offered better rates today and several offered worst rates than yesterday.  The net effect was an increased prevalence of 3.75% among conforming 30yr fixed rate quotes for top tier scenarios. 3.625% is still out there, but today's closing costs would be higher than yesterday's.

More intraday volatility today, swinging mortgage markets down quickly on news form the ECB meeting taking place. While the official announcement of the stimulus package from ECB will not occur until tomorrow morning, tidbits out from one of the 25 council members sent the 10yr note yield higher and MBS prices dropped. Markets have been waiting for months for something from the ECB to attempt to keep the region from deflating. Most global markets are currently waiting with crossed fingers.

US and global economies are struggling - as the US though is managing economic improvement as long as you do not look hard under the headlines. Hope is a positive thing but maybe too much hope will eventually kill the goose. We continue to warn that what you see is not what you may get.

The Fed’s polices in terms of inflation has so far failed. Three years of QEs between the Fed and Treasury have had no effect on inflation. No inflation is hindering the housing market rebound, would be buyers have no impetus to by now, even with low mortgage rates with no price appreciation takes away urgency. There is not just one reason for the sluggish economy, as we could write a book on all of the details, both here and Europe as well as most other industrialized countries has seen no increase in wages. The middle class is drowning, ObamaCare and no prospects of wage increases keeping consumers from spending.

We noted early this year we expect increasing volatility, but it is not likely to end soon. With no inflation anywhere on the radar investors can and are using US treasuries as hedges against their equity portfolios. In that sense it does not matter how low rates can decline. Questions abound, how low rates can decline? Concern that these low yields are too low and buying will suffer is not likely - bond buying is a hedge for many as they do not care how low rates are or whether rates are declining or increasing as long as they are on the right side of the trade.

In summary, the implication of this big-picture volatility continues to be that there is more risk and reward for locking and floating when it comes to mortgage rates in the US. As we discussed yesterday, the elevated level of volatility acts to limit the reward side of that equation--something we've seen on several recent occasions where broader bond markets suggest lower rates, yet mortgages fail to follow. We should know a lot more about how the bigger-picture is shaping up tomorrow after markets begin digesting the ECB news.

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.