My Mind on Mortgages » should I lock or float?

Rate Update September 22, 2009

Evan — Tue, 22 Sep 2009 13:48:55 +0000

Mortgage rates are mostly unchanged from yesterday despite a sell-off in mortgage-backed bonds in the afternoon.

The major story today is the Fed’s record auction of 2-year notes. The Fed will sell $43 billion of them later this morning. The additional supply of fixed income securities will compete with mortgage-backed bonds for investment dollars. Should demand for bonds be strong we’d expect mortgage rates to remain low and vice-versa.

Threatening the demand for bonds today is that fact that Japan is celebrating a national holiday.

The Fed begins a two-day meeting on monetary policy today. Tomorrow they are expected to leave short-term interest rates unchanged. What we’ll be listening for are any comments relating to the Fed’s TALF program and whether or not they will use the remaining $200 billion to purchases mortgage-backed securities or not. If they indicate that they will not this would almost certainly cause rates to rise.

Current outlook: locking bias

Rate Update July 30, 2009

Evan — Thu, 30 Jul 2009 14:33:30 +0000

Mortgage rates ticked higher this morning. Watch today’s you tube video for an explanation.

Here are links that are referenced in today’s you tube video:

*‘Rate update’ at the beginning of 2nd-quarter earnings season
*‘Rate update’ at the beginning of this week on the subject of the treasury auctions

Current Outlook: locking

Rate Update June 23, 2009

Evan — Thu, 23 Jul 2009 14:21:30 +0000

As we know mortgage rates typically rise when the stock market rallies. That is the case this morning with the Dow Jones Industrial Average surging past the 9,000 mark for the first time since January.

Stocks are rallying on a flurry of positive earnings data from Ford Motor Co., AT&T, and 3M.

However, stocks are also benefiting from National Association of Realtors report which showed that existing home sales rose for the 3rd straight month in June. The same report also showed that inventories fell to 9.4 months vs. 9.8 the month before. This is great news to share with homebuyers who are concerned about the housing market.

There is significant technical support for mortgage-backed bonds at present levels but we still think locking is the best play if you haven’t already.

Current Outlook: locking

Markets expecting more interest rate volatilty

Evan — Fri, 10 Jul 2009 23:09:30 +0000

According to this article featured in the Economist magazine back at the beginning of July the markets are currently less certain about the future prospects of long-term interest rates (i.e. mortgage rates).

The chart to the left shows that the “implied volatility” in the interest rate market has increased rather significantly since the beginning of the year.

What does this mean for mortgage rates?

First, it means that predicting mortgage rates accurately will likely be difficult in the coming weeks.

Second, it means that we may see wild swings in mortgage rates. Instead of gradual increases and decreases over time that we’re accustomed to we might see more severe adjustments in shorter periods of time.

As always, if you’re happy with the fact that your interest rate is at a historically low level and your payments are comfortable it is probably a good idea to go ahead and lock in your rate to protect yourself.