Rates Holding...

January has been a strong month for mortgage backed securities, and while we still have a few weeks of trading left in the month, it appears as though the MBS has support at these high levels that it didn't have in the months previous. This is very bullish for interest rates which have fallen to their lowest level yet again.

All this is due to the uncertainty governments and economies face around the world, investors looking for some safe haven have found mortgage backed securities.

It's not all roses and lollypops though, recent changes made in Fannie Mae and Freddie Mac to their guarantee fee have lenders across the board scrambling to raise the premiums they charge when offering rates. This is not something your average market follower will be aware of, and I can assure you lender's will not be advertising this raise in fee. And they don't need to, it's a hidden fee that they pay to the underlying investor... consequently they are passing thiis expense on to the borrower in the form of higher rates to protect their profit margin.

These changes will begin to take affect in the coming days and weeks with the end of January being the witching hour.

Not much you can do about this, maybe write to your Congressman... but honestly this is in response to Fannie Mae and Freddie Mac posting losses quarter after quarter. Then they walk over to Congress with their tail between their legs and ask for more money... we're not talking millions, we're talking billions each quarter, a perpetual event that has been happening over and over again since this mess erupted in 2008.

Something has to be done to make to turn this trend around, so while I am upset at this raise in cost, something has to be done.

I don't want this to scar anyone into inaction, after all rates are as low as they have ever been, and even with this change in how pricing offered to borrowers will be calculated, there are still amazing rates to be had, and if the MBS continues to trade up, this will be inconsequential.

If you've been on the fence now would be an excellent time to secure financing.

Support to Start 2012

This morning was a little unnerving, watching the mortgage backed securities market. The stock market had opened strongly and treasuries were not trading well, selling off leading to higher yields and little support to the MBS.

It looked as though a down day was inevitable. Then a rally ensued and the MBS market slowly but surely climbed out of the ditch it had found itself in to stat 2012.

The day ended zero sum, an incredible accomplishment considering it was done in the face of an equities rally, while treasuries sold off.

This is a strong sign of support for the MBS markets and future interest rates. It would seem the low rate environment is here to stay, at least for the time being.

Those that have been sitting on the fence need to look at this rally as a beacon aimed straight at them. While 4.000 is available at no cost to most qualified borrowers, we may see a day or two where 3.875 becomes available. These are the rate sheets worth paying serious attention to.

While I do not think we will see the mortgage backed securities market rally to a new high forcing rates down onto a new lower plateau, I do think the current range has serious support and will offer these low rates for sometime.

Timing your rate lock should be your primary concern, wait for a bullish day and don't hesitate to lock when you see the terms you've been waiting for.