Mortgage Rates Continue to be Even

Mortgage rates continued to be even today as there was not much news to shake up the trees in the market.  It seems like our roller coaster is stuck at the gate as we are now not moving as we had the wild ride last week.  4.5% remains the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers.

For a second straight day, the bond markets that underpin mortgage rate movement had precious little data to motivate movement.  Weaker stocks helped interest rates today after increasing this morning the key indexes fell this afternoon.  The 10yr note tested and held 2.80%, a level we consider critical to the near term for mortgage rates.  January wholesale inventories increased more than expected but final sales fell 1.9%, not good for the outlook.  Uncertainty remains high. Businesses of all sizes are not likely to expand or increase in optimism with so many uncertainties regarding the healthcare issue, the Fed, and of course - the weather.

The bond and mortgage markets can be summed up as neutral.  Most of the models are slightly bearish, just as they were slightly bullish until the employment report last Friday.  There is however a strong upside support so far on the 10yr note - always the driver for Mortgage Backed Securities (MBS).  I have been talking about the current 10yr level of 2.80% going back two years has been as a pivot point, and so far in this increase in rates it has held.  Not much to hang your hat on but we deem it critical.  If the 10yr moves above 2.80% the outlook will increase on bearishness.  The stock market still holds sway over treasuries, if the key indexes decline the rate markets will be supported if on the other hand stocks rally hard that will break the back on the 10yr and MBS’s.

In summary, risk and reward for locking and floating are subdued in this environment. If you wait to make your decision beyond today, you're essentially waiting to see if Thursday's economic data will support last week's stronger reading on employment. If it does, rates could once again move to challenge recent highs. Other wild cards include potential Ukraine headlines (which haven't done much to help rates so far this week) and the possibility of further losses in equities (which have been helpful to some extent). Neither of these are high enough probability bets to be worth much risk, but if you're inclined to float, you can simply use the recent highs seen on Friday as a 'stop-loss,' such that if rates move any higher, you'd lock at a loss. The biggest risk to this strategy is that the 'break' could be abrupt if it coincides with strong economic data on Thursday.

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 me on my website at www.CallTheMoneyMan.com   I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.