Mortgage Rates Still Moved Upward but Have Slowed Down

Mortgage rates continued to move up for the second straight day after hitting the lowest levels in more than 7 months earlier this week.  Wednesday's big move lower was a direct result of political headlines relating to potential wrongdoing in communications between Trump and former FBI Director Comey.

What does all this have to do with mortgage rates?  When "something scary" is potentially happening in the economy or the geopolitical sphere, investors tend to seek the relative safety of the bond market.  Bonds are liquid (easy to find buyers and sellers).  And they often move in the opposite direction from stocks during panic.  In other words, if stock prices are falling due to panic, bond prices tend to be rising. 

Markets have moved on from initial panic and are now biding their time--waiting for more information to come from next week's potential congressional testimony from former FBI Director Comey.  Between now and then, rates are unlikely to move much lower (they tend to get the biggest benefit on the first day of these panic moves), but they are similarly not likely to make a panicked move back toward higher levels.  What we are left with is a moderate drift higher over the past 2 days, and risks of a bigger mover sometime next week.

In summary, it is still a good time to lock for less risk-tolerant borrowers.  We have had sharp improvements in mortgage pricing this week due to the ongoing political turmoil because this threatens the political agenda markets felt might push rates higher.  One might believe this is a signal to float right now in hopes of further rate improvements from additional turmoil.  Expect the unexpected in my opinion. For short closings (30 days or less) I would be taking advantage of these gains and protecting the pricing in front of us now. More risk-tolerant borrowers can still make a case for floating if they are ready to bail (i.e. lock) if rates start moving quickly higher. Whatever you do, if you are floating, have a plan if the rates take off.