Mortgage Rates Stopped Their Rapid Push Upward

Mortgage rates opened mostly unchanged, and we have seen the Mortgage Backed Securities improve over the course of the day that has finally stopped the rapid push that we have seen in rates since the end of last week.  Even though the economic reports were favorable to push rates even higher, the news from the ECB came in as expected as they left their rates unchanged, which in part led to the slight pull back (or at least stopping) the rates movement that was on the move.

Where Are Mortgage Rates Going?                     

>>> Rates are moving up

As expected the ECB left rates unchanged at its meeting concluded this morning. Mario Draghi played down concern over recent softness in the euro zone economy, leaving the door open to ending lavish bond purchases by the end of the year.  He commented that the economy remained strong, although he acknowledged evidence of a “pull-back” from exceptional growth readings seen around the turn of the year. “The underlying strength of the euro area economy continues to support our confidence that inflation will converge towards our inflation aim of below but close to 2 percent over the medium-term.”

The price gains we see in the MBSs and the 10-year Treasury note does not change the bearish forecasts for rates.  We have seen and heard from various traders that they are not surprised with the little improvement today. The best bet is to use any improvements to get consumers buttoned up.

With the movement above the psychological barrier of 3.0% yesterday and as significant as it was in the long-run, it did not negate the fact that the vast majority of financial market participants were carefully monitoring the situation and making moves based off of what happened. Mortgage rates tend to move in the same direction as the 10-year yield and so was no surprise that we saw them move higher this week.

Freddie Mac Primary Mortgage Market Survey reported that rates “increased for the third consecutive week, climbing 11 basis points to 4.58 percent. Rates are now at their highest level since the week of August 22, 2013.”  Higher Treasury yields, driven by rising commodity prices, more Treasury issuance and the steady stream of solid economic news, are behind the uptick in rates over the past week.

Despite the increase in borrowing costs, demand for home purchase credit remains solid. The Mortgage Bankers Association reported in their latest mortgage applications survey that activity was up 11 percent from a year ago.”

Rate/Float Recommendation           

>>> Lock now before rates move higher

Mortgage rates may have slowed down today their movement upward, and the 10-year Treasury is below 3.0% at 2.98%. We may see move a little lower today  ahead of tomorrow's GDP numbers. This could cause a good deal of volatility heading into the weekend.

However, one should note that they will continue to rise over the coming weeks and months, it makes sense for borrowers to lock in a rate sooner rather than later. The longer you wait, the more likely it is that rates will be higher when you finally choose to lock. . If you have any further questions, give us a call or visit our website at Call The Money Man.