Mortgage Rates

We're going to open the week right on a tipping point on most loans. Depending on credit score, property type and all the normal details, the 30 Year Fixed rates were trying to break past that 5% mark when the market opened today.

We saw 4.875% early, but the market has sold off a little bit this morning.  We're seeing equal movement both FHA and conventional.

We're seeing the same ranges on the other loan products.  The 5/1 ARM at 3.875% at open, back up to 4% with many lenders. The 7/1 ARM is jumping around near 4.25% and the 10/1 ARM has had the least change to still rest right near 4.5%.

As mentioned in this week's mortgage rate predictions, we expect much of the volatility to come from overseas news.  Weeks like this tend to be very volatile from day-to-day.  If you're thinking about a lock, I wouldn't think too hard.  Interest rates are at their best levels in 6 weeks.

How low have rates gone in this most recent rally?  Low enough that the Mortgage Bankers Association is reporting a 21% surge in mortgage applications last week.

Today's ADP report beat expectations.  In this week's mortgage rate predictions, we cited the ADP report and Friday's non-farm payrolls report as the big drivers for the week.  We still think Friday will be the definitive break out day for rates.  It still looks like the risk-reward is 2:1 in the favor of locking.  We're still right at 5% on the 30 Year Fixed and it is probably equally likely that rates dip .125% or jump .25%.

Budgets that have $1T+ deficits mean that the Treasury needs to raise a lot of money.  Here is just next week's schedule:

• $40B 3-yrs Tuesday
• $25B 10-yrs Wednesday
• $16B 30-yrs Thursday

Eventually this supply will put pressure on rates.  This is a graph of today's pricing on a few securities.  While mortgage rates are currently unchanged, the 10 Year yield is up .33% today.   There is no direct relationship between the 10 Year and today's mortgage rates, but they eventually need to head in the same direction. Fortunately today's sell-off has been limited to Treasuries...so far.

Mortgage rates just took a nice turn towards the end of the day in what was otherwise very quiet.  If mortgage bonds can sustain their current levels, they'll close just above key numbers at the 50- and 100-day moving averages.

We're still right around 5% on that benchmark 30 Year Fixed. The 5/1 ARM is disgustingly low in the upper 3%'s.  The 10/1 ARM is interesting as well.  At 4.5%, it carries an interesting trade-off versus the 30 Year Fixed for people who know they are going to have a change in life circumstance long before 10 years. 

Tomorrow's ADP report will be a market mover.  Bonds had been in a very good streak for about three weeks and almost slipped into a slump.They have more to lose than to gain going into tomorrow's ADP report and Friday's government non-farm payrolls report, but today was a show of strength towards the end of the day.

Today's interest rates are slightly higher than Friday's. Inflation was contained, but even subtle increases can cause rates to jump. In the past few weeks, bonds have risen back to the top of their trading range.

That means that rates are more likely to go up than go down. Added to it, President Obama announced a $3.8 Trillion budget today. In order to pay for a $1.3T deficit, the Treasury auctions will continue for some time.

This could have a negative impact on Mortgage Bonds and home loan rates, especially after March 31st, once the Fed is no longer buying Mortgage Backed Securities.