Mortgage Rates See 2nd Day of Positive Change

Mortgage rates moved slightly lower today, as we saw improvements in the 10yr and the MBSs today. Despite the intraday improvements, rate/bond markets remain anxious.  Now that we have seen our first 2-day winning streak in the month of October, it's tempting to conclude that the recent trend toward higher rates is over.  But that would be a premature conclusion until we see how markets react to Thursday's announcement from the European Central Bank.  Bottom line, the past few days have been hopeful, but everything could still change on Thursday.

As long as markets continue to believe the Fed will move at the December FOMC meeting, I do not expect much improvement in mortgage rates. Yes, the Fed has been head-faking almost all of this year; saying last December it would increase the FF rate 4 times this year then kicking the can at each subsequent meeting. This time we believe it is different, the Fed will move in December. More Fed officials are climbing on board and want it done. Boston Fed President Eric Rosengren saying last week, it is time for markets to begin factoring in an increase. Yellen still appears to be timid but I do believe she will get on board unless there is a huge reversal in upcoming economic performance and employment….and I am not expecting that will occur. 

Home builders continue to exude optimism - the NAHB housing market index this morning essentially held the large increase in the index in September, down from 65 to 63 but September index jumped six points. Tomorrow September housing starts and permits.

In summary, “What to do what to do…?”  That’s a great question.  It’s either a great time to lock or a very bad time.  We are sitting at or near the bottom of our recent range ahead of potentially market moving news out of the ECB.   It is a good bet that this news will either push us lower into the previous range or have us bouncing higher.  You would have wished you locked if we get the latter of the two.  Anyone looking to take on a bit of risk right now could be handsomely rewarded.  Sounds tricky I know but you should be used to that by now, no?