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Bart Castelli

Mortgage Rates Held Steady Despite Stronger Data Today

Thursday, April 24, 2014 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 - Message

Mortgage rates held steady despite stronger data. The most prevalently quoted conforming 30yr fixed rate for best-case scenariosis pushing 4.375%,though many lenders are better-priced at 4.5%.

Mortgage prices started soft this morning with the 10yr note rate up to 2.72%,but by mid-morning improvement was seen as selling abated through most of the rest of the day with the 10yr yield falling back to unchanged from yesterday's close and Mortgage Backed Securities (MBS) prices better than this morning's open. The three month long rang in mortgage and treasury rates continues, as now most of us wonder how much longer the markets can hold in a generally flat trade.

We get a lot of questions and comments about why interest rates are not increasing as most economists and traders had expected by now. One reason of course is the unsettled situation in Ukraine. Another is the underlying uncertainty about the outlook for the stock market, an increasing number of still minority pundits are sending out warning signs recently. Third is the US employment picture is not good - based on headlines it looks positive and improving but the majority of new jobs being created are low income jobs that families cannot live on. Last is inflation, or the lack of it, is becoming a problem for the EU with ECB Pres. Mario Draghi outwardly fearing possible deflation.

In the last four sessions the bond and mortgage markets have started the day lower in price but by the end of the prices have recovered with the 10yr note in a 4 bps range on its yield. Technicals still holding a slight positive outlook but as we have noted, technicals are less important in the current pattern. The best we can say is that until there is a new set of news the bond and mortgage markets will continue to drift sideways. Unless there is a strong decline in the stock market or unless there is a serious increase in hostilities in Ukraine interest rates have more potential to increase than to decline from present levels. Traders waiting to pounce when a new set of fundamentals takes hold.

In summary, I have favored floating all week. If you followed that advice, you have not gained anything or lost anything. Headlines from Ukraine seem to be picking up which could benefit mortgage rates. I still favor floating, but if you are within 15 days of funding, you might want to consider locking as that will get you the best pricing and eliminate any risk of rates worsening.

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