Mortgage Rates End the Week Better

Mortgage rates moved a little bit lower today reaching their best levels for the week as we started to see the most prevalently quoted conforming 30yr fixed rate for best-case scenarios hit  4.375% in most cases, but 4.50% was still the safest bet. While this is the same rate as yesterday, the cost to obtain it is lower.

Safety was the mood of the day as the stock market plunged while treasury rates sent Mortgage Backed Securities (MBS) higher. Ukraine/Russia tensions are heating up a little. The 10yr yield has now been returned as the agreement has failed and Russia rattling sabers at an increased pace. Threats are coming from both sides but Russia does not appear to give a damn about what Obama and Europe think about it.  Putin betting that Russia can stand economic and financial pressure while the US and Europe cannot take much pain. Come Monday, if tensions subside in Ukraine interest rate prices will decline.

The stock markets took some hits today as was the same reasons why treasuries improved.  There are many ways to look at a prism, although when twisted the patterns change in many different ways, there are no more or less glass pieces in the picture. The same can be said about the strength of the economy - twist the tube to the right and the outlook looks good, twist it slightly to the left it looks a lot different.  Most analysts, economists, the Fed and politicians are selling the positive pattern that good times are just around the corner.  Many ways to turn the pattern but in reality the facts are barely supporting the bullish economic growth outlook.

The housing sector has always led the economy out of recession, this time that is not happening.  The government has basically killed the housing markets with unacceptable credit squeezes, mountains of paper work, adding no meaningful jobs (yes there are some but very few) pay a living wage, and no pay raises for those lucky enough not to have been fired and had their credit shredded. Now with Fannie and Freddie pouring out huge profits the move is on the dump them even though there is no viable private MBS market anymore. No first timer buyers and no inventory to sell to them. And we don’t want to hear that high interest rates are the cause. It is a generational switch - home ownership is no longer the goal for the young segment. Interest rates have moved up, but with extreme credit standards an increase of 50 bps put a large percentage of possible buyers out of the ability to get a loan at any rate.

In summary, as rates drift down to the bottom of this range we've been in since early February, borrower's need to think seriously about protecting those rates. Recent history shows we'll be heading back to the ceiling of that range at some point in the near term and a strong Employment Report next week could easily be that catalyst to erase recent gains.