Mortgage Rates at New Lows

Mortgage rates dropped quickly to their lowest levels since the beginning of June with all the headlines swirling about between Ukraine and Russia. The biggest benefactor of this was the US Treasuries falling to their lowest levels in over a year, but the Mortgage Backed Securities (MBS) did not benefit as much.  Today's improvements further solidify 4.125% as the most prevalently quoted conforming 30yr fixed rate for flawless scenarios.  4.25% is starting to fade from view at this point, and 4.0% wouldn't be out of the question if we see just a bit more improvement (though it has a ways to go before challenging 4.125% in terms of prevalence.

Until late this morning the focus was on the economic weakness in the US and Europe. Today the U. of Michigan consumer sentiment index fell to its lowest level since last November.  The NY Empire State manufacturing index was a lot weaker than thought, and yesterday weekly jobless claims increased 21K against estimates of an increase of 6K. Wednesday July retail sales showed no gains from June, all of the housing reports are negative. In Europe Germany GDP was -0.2%, France no economic improvement and Italy in recession, Greece never got out of it and other countries slipping into a deflationary climate.

The geo-political issues are still likely to roil markets on each report out of Ukraine, Iraq and Israel. The economic measurements will always be there and will take on more or less importance balanced on the global incidents. We warned markets would become more volatile as interest rates fall and economic conditions soften. Today is a prime example of volatility. Traders react rapidly, not waiting a second when there is a report regardless of the eventual reality.

Next week is going to be very volatile in the global financial markets. It will take nerves of steel to ride through it; what will be Putin’s next move? The 10yr note is now very overbought based on the 14 day RSI, every time over the last year when the index has declined to the current level there was a bounce. If there is any relaxation in Ukraine/Russia look for interest rates to increase a little, but the larger trend will continue to remain bullish.

So with all the improvements over the past week now adding up to what are effectively the best rates of the year, what should you do if you're considering locking/floating?  First of all, it's much better to regret a bad float decision vs a bad lock decision. The major word of caution is that all the recent improvements have been extremely hard-fought.  We're seeing mortgage rates have a very hard time moving lower at any sort of reassuring pace.  The only reason we can say rates are the best in over two months is the combination of an excessively narrow range, and slow, steady improvements that finally crossed their last line in the sand with today's rally.  Bottom line - the trends that have taken rates lower are still intact, but it's never a bad idea to lock when rates are near their lowest levels in over a year.

In summary, more improvement today on the heels of more geo-political events and a little bit weaker economic data. I've been cautious through this entire rally to lower rates for short term closings and I remain so. It really won't take much for a reversal and you don't want to be caught short. Again, for longer term closings the “Pigs Get Fat, Hogs Get Slaughtered" theme remains but you need to assess your risk tolerance level before heading out on the float boat for longer than a day or so.

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.