Mortgage Rates Continues Rally - But Concerns Are Coming

Mortgage rates continued to push lower to levels not seen for nearly a month.  We started this direction last week with the Feds announcement, but now the motivation is now being looked at with the political uncertainty surrounding the new administration's ability to pass the new health care bill.  There have been several other contributing factors driving political uncertainty, but Thursday night's health care vote is a focal point.  Most media reports suggest passage is unlikely, but that a modified version of the bill might be able to clear the House.  Even though the Senate would still need to vote, if any sort of healthcare bill passes the house tomorrow night, mortgage rates could make a change and head north again.

Another terrorist attack in London this afternoon. 4 dead and 20 injured.  The assailant ploughed a vehicle through throngs of people on Westminster Bridge before fatally stabbing a police officer was killed. It was the latest in a series of terror assaults in Europe and came exactly one year after suicide bombers attacked Brussels, targeting Brussels Airport and a metro station in the city center. It bore similarities with the attack in Nice last year when a man drove a truck through a crowd of pedestrians, killing 84 people.  

Tomorrow we get February new home sales, which should come in around 565K.  Since last week, the 10yr note yield has declined and MBS pricing has been increasing very nicely. The 10yr yield dipped briefly to 2.37% this morning before closing at 2.41%.  I anticipate that we will see a little bit of retracement in the next few days, so several people should consider that this might be a good time to lock in these gains if closing soon.

In summary, with rates having dropped recently, and a couple of potentially pivotal events upcoming (Yellen speech and healthcare vote), it feels like another good time to lock in the recent rate gains.  Could this rally continue?  YES!  But any further gains will be slow to come and banks even slower to pass them along.  However, if bonds start to slip, rates could rise fast and banks will worsen pricing even faster.  I see this as another indication to recommend locking in your rate and not take the potential risk of floating.