Mortgage Rates Now Moving Positive for Consumers

Mortgage rates continued lower today, reaching levels not seen since early February.  This further solidifies the positive move that followed last week's FOMC Announcement and Press Conference and offers ongoing confirmation that the disconcerting trend toward higher rates that began in February is defeated.  While that does not necessarily have any implications as to the direction of the next trend, it does mean that we are no longer following the same steep and steady path toward higher rates.

With slight gains in MBS prices, we did see very little if any change in the 10yr settling in at 1.91%. Friday Q4 GDP is coming on as current estimates say growth in the quarter was +2.4%, even though last month the preliminary report said +2.2%. Federal Reserve officials last week cut their economic growth estimate for the fourth quarter from a year earlier to 2.3% to 2.7%, down from as much as 3% in December. Inflation will range from 0.6 percent to 0.8 percent at the end of this year, policy makers forecast, down from a range of 1% to 1.6% projected in December.

Technicals look good for the bond and mortgage markets - not strongly bullish but bullish nonetheless. The positive bias will hold as long as the 10yr note stays below 2.0%.  MBS prices will remain bullish as long as the 3.0 coupon does not climb over 100 basis points to 101.20 (currently 102.25). 

In summary, the momentum is in our favor. At this point I would not expect any large improvements to rates/spreads, but we are buying more time allowing borrowers to lock for longer periods of time on specific rates they are attempting to capture. Time Value! I think this will be the general trend heading into next week's employment data. Inside of 15 days should lock - longer time frames can test the waters at these levels.  There's data throughout the week and I think there is an opportunity before our next move higher. If you decide to float, do so with caution.