Another Bad Day for Mortgage Rates. Lock Strategy a Factor of "Timeline to Closing"

Mortgage rates had a bad day yesterday. Consumer borrowing costs started moving higher early in the session and never looked back. 

We had no relevant data on the calendar today and the marketplace was generally quiet as many investors and decision makers took time off for religious holiday.  This left mortgage rates to take their directional guidance from related markets. Stocks drifted slowly higher after moving mostly sideways throughout the day, this did little to reverse recent weakness in the bond market, and interest rates rose for the third straight session.

Consequently...MORTGAGE RATES HAD ANOTHER BAD DAY

Lender rate sheets are worse again. The par 30 year conventional mortgage has risen into the 4.375% to 4.625% range for well qualified consumers.  If you are seeking a 15 year term, those rates are also slightly higher and are now in the 3.875% to 4.125% range.   To secure a par interest rate you must be willing to pay all the closing costs associated with your loan including an estimated one point loan origination/discount/broker fee.  If you are planning on keeping your home for less than 3 years, you should consider a loan with less or no closing costs,  but you will have to accept a higher interest rate in exchange for lower closing costs. 

The recent rise in mortgage rates illustrates the need to view floating on a "timeline to closing" basis.  We have been locking at the MBS price highs and floating at the MBS price lows. This is our "Play the Range" strategy. Currently we are near the bottom of the MBS price range. With that in mind, borrowers who are scheduled to close in the near term may not have the time to wait for the next reversal in prices, but we still feel borrowers who have time on their hands should wait for a turn around.

This leads me to what AQ wrote yesterday: "We might have seen the lowest rates we're ever gonna see, if that is the case, then those rates are already behind us so it doesn't matter. But I think rate watchers with waiting time should sit back for now and see how this latest shift in benchmark yields plays out. If push comes to shove and we need to pull the emergency chute, we will alert.  In the meantime, let's see how the market reacts to higher yields. Play the Range Until the Range Plays You. "

The week ahead is busy in terms of data. We get some potentially high impact reports with Retail Sales, Industrial Production, and Consumer Price Index.  If the data disappoints, the bond market should respond favorably, which will lead to improvements in mortgage rates.  There is definitely room for mortgage rates to continue to rise though,  but we still feel that borrowers who are closing in the next 15 days should've already locked, if you haven’t I would suggest locking today because we still see high risks in floating into next week. Longer term fence-sitters...see comments above.

Never Forget September 11, 2001.