Wednesday 7/9/08 ... Happy Days!

By: Matthew Graham •
After the tremendous weakness in the mortgage market last week, this week has taken a turn for the positive.  One of the most important factors in causing recent weakness has been the overall "shakiness" of the broad economic picture.  As we discussed, when that occurs, the "flight to quality" bond buyers tend to favor the safest bonds: US treasuries.   This leaves mortgage backed securities by the wayside.  All hope seemed lost when Fannie Mae and Freddie Mac--integral players in the MBS market--came under fire about poor earnings and stock prices.  A day later, a comment from the director of OFHEO saying that they were sufficiently capitalized, magically took all the pain away and investors appetites for MBS seem to be returning in spades.  Will they stick around? 
The Numbers:
 
With the improvements that will be seen in today's rate sheet, we may see the return of the high 5% range on a 30 year fixed for the best possible qualifications. 

The News:

 See Rates from Lenders in Your Area
  • There is no relevant economic data that was scheduled for release today.

Conclusion and Lock/Float Considerations:

Slow news days are a tough call because anything can happen.  We are looking very good right now and have had reasonable strength throughout the morning.  If the climate remains stable, this should continue throughout the day.  But on days like today, unexpected headlines, or "tape-bombs" as some say, could shift market sentiment in a matter of minutes. 

Whether you float or lock today largely depends on how aggressive your lender is.  If they are pricing on the bleeding edge of this potential uptrend, locking is worth consideration.  fundamental and technical indicators are leaning towards rates getting even better, but as I like to point out, the regret one feels for floating at the wrong time is significantly more painful than that of locking at the wrong time.  Even though rates will *probably* improve, today's rates are still going to be the best we've seen in just over a month.  Not only that, but we are much closer to historic lows than highs.

So although if you lock, rates may drop further, it's not a bad call.  But if you have the risk tolerance to put either the cash or the monthly payment amount to "let it ride," you may be well rewarded.  This assumes that the economic data, at the very least, is not damaging to mortgages.  So the moral of the story is that it's slightly more likely rates will improve than worsen, but they're still quite good.  You wouldn't see them go insanely lower in the next 20 days anyway, and on the chance they do go up, you'd be pretty ticked if you floated.  So there's no shame in locking, but if you can tolerate the risk of being "ticked" both emotionally and financially, the odds, ever-so-slightly though it may be, favor floating.

As always, the Professional side of this blog is updated multiple times per day to give mortgage professionals alerts as to when prices may change.  We don't mind if you drop in, but it's a bit technically worded.  If you're interested, make sure you check out the MBS primer.