Mortgage Rates Fall Back into Range

This last week has been anything but favorable to mortgage rates. Last Thursday we hit new record highs, busting through every ceiling history had produced, wetting the lips of every originator waiting for lower rates. This sharp upswing was almost perfectly vertical, suggesting a strong demand for new coupons.

Since this buying frenzie, we have seen a sharp sell off as investors took profit. Let's be clear a sell off at new highs is to be expected. What we saw however was not jsut a mere sell off, it was a exit from MBS leading our markets down, down, down... forcing yields back up and rates higher.

Okay okay... enough doom and gloom. Yes rates are not were they were last Thursday, but were we sit right now is on our previous resistance, which has turned into support since last Thursday.

What does all this mean... we've entered a new range, currently sitting on its floor waiting for the market to push us higher in price and lower in rate.

There are a couple of important revelations that took place that should be pointed out. First during this corrective period we saw the 10 year fall to 1.72 in yield. It is now back at 2.00 in yield. Of course the MBS follow the buy and sell trends of the 10 year this last week, however our markets have faired better than the treasury markets.

Like I said, we are now sitting on new support which use to be our resistance. This run at the bond market has essentially forced us into a better range. So when the 10 year begins to creep down again in yield, the MBS markets should also produce lower yields which means better rates.

Ultimately I think we will see lower rates in the coming Winter months. Add all this up and the name of the game is patience. While wealth favors the prepared, I suggest getting everything in order so when the low rates do return you can execute.

Execution is the name of the game, and waiting until rates are available typically means you will not be able to close in time to realize that rate. Pay attention to locks and the lock period... watch turntimes carefully.... they will increase which can force lock extensions which cost an additional premium. Manage you time productively and you'll be able to capture an incredible low rate in the months to come.

Friday Sell Off...

Okay, no one likes a sell off (unless you're the one selling and profiting), but after the gains we saw in the last two days we should expect there to be some profit taking and settling dust as investors figure out what their next move is.

The question is one we have posed quite a bit recently, that's not to take away from the serious nature of the question. The world right now, from an economic standpoint, is on fire. The rush into long term markets is a result of the fire now burning.

One would expect long term markets to do well during as the world burns... and to answer that cry, the bond markets have done well, very well. You can't go up however if you don't once in a while come down... and that is the formula today.

Monday will be telling... I doubt we will see the sell off continue. Realistically I expect us to post gains tomorrow and throughout the week as investors continue to fee equities and move into the longer markets.

There will most definitely be bellowing from those on CNBC that don't want to see the market crumble and are still convinced we're in the heat of a recovery. Trust your gut... and you experience.

The smart money is shoring up... that means cutting expenses and protecting capital. There is no better way of reducing expenses than dropping your interest rate a point... with current 4.000% 30 year fixed rates available... now more people can realize that goal than ever before.

Don't hesitate, turn times are going to get long, beat the rush and get your paperwork in for underwriting as soon as possible.

Anyone interested in a 4.000% 30 year fixed is welcome to contact me... obviously this rate and the terms are subject to market changes, so take while the taking's good.

Mortgage Rates Fall as Fed Twists

Well the Fed has come out and announced policy that has sent our rates to all time lows. Operation twist as they say is something that involves the Fed selling short term debt to buy long term debt. This move does not increase their balance sheet so it is thought of as noninflationary (good for our markets) and of course the funds allocated to the longer term term bonds has essentially created a backstop that QE once provided our equities market. This "insurance" policy as some consider it means there is little risk to investing in long term bonds and mortgage backed securities. If the price falls, the Fed has already pledged to buy, so there is little downside risk.

This has lead the MBS markets to knew historic highs. While our previous note to watch was the 4.000 coupon, we are now watching the 3.5% coupon as benchmark, which simply indicates the low rate environment is going to be here for a while.

That's not to say you should hold off and wait for things to improve even further. Peaks and troughs.... what typically comes after a peak? The correct answer is trough, and considering we are peaking, what goes up must come down... timing is everything in this market, play the upside of a trend and pricing is typically better than a downtrend that happens to be slightly higher in market price... why... the lenders are hedging up or down and following the trend with their offered rates.

Yes, this is all very complicated, and is why it pays to have a responsible and well informed loan officer in your corner.

Fed Meeting Day 1...

So it begins... the two day Fed meeting that investors have been waiting for. For the last couple of weeks we have traded in a range with the market unclear as to which direction to follow. Flee with the bears, or run with the bulls?

The Federal Reserve has been anything but quiet in this crisis and has shot every type of arrow at this beast of a depression (let's start calling a spade a spade) we're currently battling, yet nothing seems to be working.

If you ask me the Fed needs to step back and let the free market fix itself in the coming years, but that's not going to happen, those that tinker will continue to do so, and this roller coaster will continue through the peaks and troughs that give us all that weightless feeling in our stomachs.

Question is, which way the Fed will nudge us this time? There has been talk about QE3, and if you read this blog you know how I feel about it... on a scale of 1 to 10... I give it a generous 1, but I digress... then there has also been talk about operation twist which is using capital generated from mature short term debt to buy newly issued long term debt. Not really addressing the real problem but "okay." This balance sheet move isn't really going to solve anything but it will help keep interest rates low for the time being which the Fed believes will help spur the economy. Considering we have been operating in a low rate environment now for the last two years, I doubt this is going to have any real effect.

Hmmmmm.... the Fed is running out of options, perhaps they need the two days so they can brainstorm some more possible solutions.

It's a mess out there, contrary to what you hear from the mainstream media, and it appears to be getting worse. Europe is a hay bail covered in kerosine, Greece is soon to be known as the Country formerly known as Greece, and our Fed is naive enough to believe opening their window and pledging dollars will solve the Eurozone's problems. The problem is the Eurozone, and the longer we perpetuate it, the worse things are going to get.

Right now we are witness to the first economic world war... in which all major economies are racing to devalue their currency in relation to all others. This is fine for governments, but when this action plan hits main street and real inflation takes hold, we may actually see politicians tried for treason as our net worth dwindles into oblivion due to their chosen monetary policy.

An interesting reflection which has terrible consequences on every man woman and child that is not in a position of power. We should be very mindful of what the Fed decides to do moving forward.

Mark my words.

Mortgage Rates Climb due to Uncertainty

Mortgage interest rates are now on the rise after a healthy uptrend and stable range were shattered by new Fed policy that got little attention in the news but has had sweeping effects across the markets, particularly the bond market.

It was yesterday morning when the Fed announced they would be opening their window to foreign investors and pledged U.S. dollars would be available for the next three months for these investors to borrow and or swap out for other failing world currencies. Honestly I do not have much information on their play here because its on the down low... hush hush... a play made by those looking to promote a new world order and bring everyone and everything under a single regime and banking system...

Forgive me for this blog getting political but unfortunately our monetary system has been politicized and there is no way around it anymore. One would expect the IMF to step and and back the Eurozone, which they have done, the Fed moving in behind them is just another backstop to help ease concern.

Long and short, U.S. tax dollars or newly printed dollars, or electronically created currency will be given the the European Union at the expense of the United States. What effect does this have on you?

Immediately the ten year treasury yield shot up from 2.000 to 2.1000 in yield. Due to concerns about inflation most likely, this forced our markets down ten ticks yesterday. The damage however is most likely far from over. The real problem is this move shattered the confidence many investors had in the MBS markets and blew straight threw our support. Now we are down three on the day... and what was an uptrend now looks like it may be a down trend.

If our Treasury Secretary and the Fed continue spending and giving away money as they hope to, I don't expect rates to stay low despite their claims that they will.

Time will tell. Some choppy waters and questionable rates ahead of us... Keep an eye on headlines.

Range Bound Interest Rates Remain Lowest on Record

There are no if, ands, or buts about it, home loan interest rates remain at some of the lowest recorded levels ever. The range we are currently enjoying appears to be a plateau leading well into the future, a conclusion that is not off base considering investors appear to be comfortable with the current yields being paid in secondary.

The ten year treasury yield remains on or around 2.000% which is incredibly low, yet investors are moving into the 10 year at signs of the yield climbing thereby creating the equilibrium experienced in todays market. In other words, investors are comfortable with these yields considering this economy and the future outlook.

That doesn't really say much for our economy... to say the least, and one msut wonder what the current Obama administration is going to do, because the jobs bill appears to be failing at face value and accused of being more of the same. While these rates are very attractive for homeowners, the simple fact that we are not seeing a return of new home buyers despite low real estate prices and low interest rates suggests the real estate market might be in for another correction.

If I am right about this and home prices are about to fall, those that are looking to refinance should do so while their equity positions are strong. Those looking to buy, you are responsible for holding up, or bringing down the current real estate market and home prices... while this is a true statement, we must understand most people would like to participate in this low price market, however due to unemployment and uncertain future employment, caution is the smart play.

So here we are... interest rates for home loans are at the lowest point on record. If you qualify... carpe diem.

Mortgage Rates Hit Resistance

Wednesday after Labor Day... yesterday we enjoyed gains all day until the final hours of trading when the market sold off to a zero sum day. This morning we opened low and the sell off continued as equity markets rallied. Fortunately the MBS market has rallied since the low price point of 104.03 and we are now back up to a price point of 104.10... Still down 4 ticks on the day, but a nice recovery to say the least.

Rate sheets this morning, to say the least, were disappointing. This fact is probably due to the sharp initial sell off we experienced right around the time rate sheets would have been released. This recovery, assuming it holds should lead to reprices for the better as the day continues on.

Think it is clear interest rates and the mortgage backed securities market is taking its cue from equities and the treasury more than ever. It is a back and forth trading environment where traders are moving between long term and equity markets trying to find the best returns for their captial. Unfortunately the flip flopping is forcing volatility indices through the roof and leading to more uncertainty. All things considered it appears as though low rates are here to stay but we will flip flop between good and bad pricing.

For this reason it is critical to pay attention to rate sheets and be prepared to lock at the appropriate time. Kind of like cooking chicken... take it off the grill too early and you're going to be sick, leave it on the grill too long and you're eating rubber.... it's all about perfect timing. Patience is key and executing when the time is right is critical. While lower rates are a distinct possibility, we have to consider the fact that this may be as good as it gets and must be willing to settle in the range we are currently trading.

Labor Day Rate Watch...

For those loyal readers you will recall a post I published about two weeks ago referencing labor day weekend as a pivot point to pay attention to. I also mentioned that I was not going to go into details because despite markets being cyclical, we're in anything but a normal environment and watching and depending on cycles in this market could spell certain doom.

That's not to say we completely abandon them. So what does labor day typically mean for interest rates and home loans. In the past, experience has shown rates typically fall after labor day and remain low through the winter months. It's hard to believe we could fall much lower - 4.25% on a 30 year fixed currently offered at no cost for qualified borrowers - but the fact remains, mortgage backed securities are posting gains which lead to lower yields and better rates for borrowers.

Usually moving into a long weekend we will see bond markets hedge and sell off so they do not have to worry about the markets, and they can enjoy themselves over the holiday. Then come Tuesday they reassess and reinvest based on those assessments. Today (although it is still early) we have not see the sell off that is typical with long weekends, instead we've seen a strong buying trend which is very bullish for our markets.

Couple this with the unemployment report which showed non farm payrolls adding 0 jobs - that's zero - and claims that the 10 year yield may fall to 1.5%, and you've got a road paved to lower rates.

Of course, nothing is certain and assured until you've got your rate locked into a period in which you can close, and we're not the type to count our chickens. For this reason, I highly suggest those interested begin getting paperwork in place so they can take advantage of the low rate environment that is coming.