Mortgage Rates Volatility Prompted Weaker Territory

Mortgage rates began the day in even better shape than yesterday, but market volatility prompted weaker territory compared to yesterday, but still better than any other day of the year.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains at least as low as 4.25%, with some lenders trying to hit the lower rates with some additional fees.

As we discussed yesterday, the first move higher in rate following yesterday's strong move down was not likely to be the biggest one.  We can also keep tabs on the newfound strength by checking in with Treasury yields.  While mortgage rates are most directly affected by Mortgage Backed Securities (MBS), all sectors of longer-term fixed-income markets (which include MBS) are sensitive to what's happening in the Treasury market.  Mortgages won't always move lower or higher in the same way as Treasuries, but if the latter is potentially bouncing on a long term low, mortgage rates likely will be as well.

With that in mind, 10yr Treasury yields made it all the way down to 2.402 today.  The previous "big deal" level - 2.47% - was broken yesterday.  Before that, we would have been very happy to be at 2.47%.  By dropping so much lower than that, markets left themselves plenty of room for rates to bounce higher without altering the overall landscape too much. 

The bottom line is that today's weakness was disconcerting today, but in and of itself isn't enough to conclude that we've seen a longer term bounce in rates.  That possibility continues to be most closely tied to next week's key events on Thursday and Friday.  There's no way to know where rates will go after that, but keep in mind that one of the scenarios could see rates continue to drift higher in smaller steps through Wednesday only to move higher at a faster pace afterward.  If you're not locking your rate after today's weakness, make sure you set a line in the sand either in terms of rate or closing costs, where you'll lock to avoid further losses.

In summary, a slight pause in rate improvements today but no meaningful reversal back up either. A poor GDP report this morning did not really help as it was pretty much expected for the most part and probably priced in already. I still believe locking any short term closings makes sense. Beyond that it's really a tough call and you need to dig deep and really assess your risk tolerance.