Mortgage Rates Moved Again Lower

Mortgage rates moved again lower today, bringing them in lines with the lowest levels of the month.  The most prevalently quoted conforming 30yr fixed rate for top tier borrowers still remains at 4.25%, but with additional closing costs, 4.125% is now in play.  With today's gains, rates have strung together a full week without moving higher at all. 

After a three and a half day weekend and after the better July employment report markets this week were touchy, especially the equity markets. The bond and mortgage markets being dragged about by increasing cacophony that the US stock market is over-bought and headed for a correction at best.  Some deep-thinking bears out there calling for DJIA 5000 soon (2015). The increased belief of an imminent correction has become almost universal, even among the most bullish. We have, as you know, been looking for the correction and pullback for over a month. Now though, while we still hold it will happen, with so many looking for it very soon - it most likely won’t occur as quickly as many currently expect.  Markets have a very unique way of disappointing when the boat gets loaded on one side. 

Next week won’t be like this one.  The calendar has a lot of data and on Tuesday and Wednesday Janet Yellen will testify at Congress on the economy, inflation and will be plastered with questions from senators and house members.  Other data out next week will start on Tuesday with June retail sales and Empire State manufacturing index. Wednesday will bring June PPI industrial production and factory use and the Fed’s Beige Book.  Thursday June housing starts and permits, July Philly Fed business index.  Friday June leading indicators and the U. of Michigan final July consumer sentiment index.  Mixed in throughout the week will be a number of Fed officials talking, likely adding more confusion while Yellen is testifying.  Next week we expect an increase in intraday and interday volatility.

Risk-takers holding out for further gains also have some room for weakness as rates aren't likely to break above June/July highs without ample warning, and it's those highs that would be the most aggressive line in the sand at which floaters should lock to prevent further losses.

In summary, looks like floating has paid off however this may be coming to an end soon. I would take a good look at the market Monday as that may be the day to start locking loans closing within the next couple of weeks.