Mortgage Rates Continue Their Climb

Mortgage rates continue to climb higher for the eighth day in a row.  The day was a bit quiet until after the auction, and then got better, then went on the roller coaster down again as it has for the last several trading sessions.  Investors and traders are trying to digest geo-political concerns in the EU with Greece and in Ukraine. Greece’s debt is not in itself a major issue but defying the EU and its covenants is. If Greece ignores, or does not get Germany to go along there may be escalation dragging other debt ridden countries into the same battle.

This week has been absent of key economic data.  Tomorrow January retail sales is the data point of the week. Sales are expected to have been down 0.5% after declining 0.9% in Dec. Also tomorrow weekly jobless claims, expected up 10K to 288K.

The increase in the price of crude in the last week is reversing now.  The drop in crude from $100.00 to its recent lows was a main driver that sent US interest rates to the lows a week ago.  Concerns of global deflation and thoughts the Fed would not begin its lift off until late this year drove traders into US treasuries, mostly foreign investors.

All of the work remains bearish for the moment. The wider perspective is more neutral than bearish - there is still the likely possibility we will see another run down in yields.  That said the prolonged 30yr decline in US interest rates is about over. In 1982 the 10yr was at 17%, the 2yr was at 20%. I did a mortgage loan, 30yr negative amortization ARM loan at 14% when fixed rates were at 17% -  just a perspective you should keep in mind when discussing what levels are appropriate for buyers and re-financers. It is pure luck for buyers or re-financers to capture the very bottom. What do I say, Pigs Get Fat and Hogs Get Slaughtered.

In summary, though we have lost some ground, overall rates are still in a great place, and there should be no shame in locking in this current environment.  If you feel lucky, and have the stomach for it, then float, but I feel that there is too much of a risk.