Mortgage Rates Improved a Little Today

Mortgage rates bounced back this morning after yesterday’s slight movement upward, but we did not see any more reaction after the opening bell.  It was strange as I had to constantly hit my refresh button to see if my computer was still operating. This morning the weekly MBA mortgage apps were released with mix results as I mentioned in my report this morning on my web site.

The National Mortgage News today wrote that FNMA is not quite so bearish for next year. The differences are in the rate projections between MBA and FNMA - Fannie expects interest rates for 30yr mortgages will be less than what MBA is forecasting. Fannie saying the average 30-year fixed mortgage rate rising only to 4.1% at the end of next year, MBA saying the 30-year fixed rate will rise to 4.8% at end of 2016…  "Refinance activity will continue to decline as there are few remaining households that can benefit from an interest rate reduction and because rates will gradually begin to rise from historic lows in the coming years. Home equity products may see an increase in demand as home prices continue to increase at a decelerating rate," according to MBA chief economist Mike Fratantoni. "Strong home price gains should help drive an increase in household net worth again in the third quarter, and, combined with low gasoline prices and mortgage rates, should support strong consumer spending throughout the rest of the year," according to Doug Duncan, FNMA chief economist.

Tomorrow we get weekly claims reporting in the morning.  Also, we will have the FHFA housing price index for August, and the most important data, September Existing Home Sales. Also tomorrow the ECB meeting, early tomorrow markets will be getting flashes from the meeting. It is not expected the bank will do anything different and keep its QE progressing at €60B a month. Draghi’s press conference, like Yellen’s will get all of the attention.  

The bond and mortgage markets still on a bullish bias, but in the immediate time frame with the FOMC meeting next week an stable stock indexes I want to keep flat and not float. As noted many times recently 2.00% on the 10yr is a rock hard resistance now. To float with the 10yr at 2.03% does not give us the risk/reward I look for when taking long positions in MBSs.

In summary, pricing bounced back somewhat today.  The ECB meets tomorrow to discuss European economics, and dismal rhetoric from them could further boost bonds.  For now, we are near the lows on the current rate range, so nothing is wrong with locking here.  Borrowers with risk tolerance and adventuresome spirits could float, but those who do need to watch markets closely tomorrow.