Mortgage Rates Continued Lower

Mortgage rates continued lower at a decent pace today, further eroding the big move higher seen last Thursday.  It is a much riskier proposition to buy into a bounce back on the first day.  Now with today's additional day of strength, last Thursday's spike increasingly looks like an isolated incident, driven by the European Central Bank's policy announcement (which fell far short of market expectations, driving stock prices down and rates higher).  There are two ways to approach this.

On one hand, lenders can see what you can see.  They, too, are feeling less defensive with this 2nd day of strength in the bond markets that underlie mortgage rates.  As such, they have passed along some more of what they had been holding back due to last week's volatility.  This provides a better opportunity to lock than last Friday's less enthusiastic rate sheet improvements.  On the other hand, the second day of strength could be a sign for risk-takers to continue floating in hopes of an even better lock opportunity. 

Cannot remind too often now - markets are very nervous as the Fed increase is closing in. What we have found is that most economists and traders do not know how markets will take the move. Usually with a certainty coming markets already discount the actual news when it hits. There are still a few though that remain skeptical that the Fed will not move. In this case it is highly unlikely the Fed will delay - markets expect it and the Fed cannot waffle now.  Yellen saw what happened last week when markets are surprised.

The caution I would offer there is that we have still, by no means, entered back into a downward rate trend.  So a decision to float would be predicated on speculation about the longer-term, bigger picture.  That is definitely riskier business until we see how markets react to next week's highly likely Fed rate hike.

In summary, bond markets shrugged off last week's losses today.  I can certainly see locking loans closing within 30 days today, and would not disagree if those closing further out wanted to take their cash off the table and lock.  Still looks like we will need massive drama to motivate rates significantly higher/lower, the question is where and when will it come from!