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Bart Castelli

Mortgage Rates Continued to Fall Back in Line

Thursday, September 25, 2014 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 - Message

Mortgage rates continued to fall back in line from several weeks ago. The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains at 4.25%, with the closing costs associated with this being the only change.

It is beginning to look like a major correction is beginning in the stock market. Over the past 15 months the stock market has had somewhat similar price action but there had been no true follow-through, this time around may be different. That traders and investors have been burned before when it appeared the indexes were going to enter sustained declines, there is still uncertainty with everyone stepping carefully now. The bond and MBS markets improved today on the selling in stocks, but the way prices rallied suggests to us a reluctance yet to make any major moves in the safe arms of US treasuries. Burned in previous attempts to handicap a big stock pullback, traders are looking with suspicion on what stocks have done so far this week.

The dollar is continuing to gain against other key currencies; normally we don't speak of it much but it is now a key factor in the bond market. A strengthening dollar adds to the demand for US treasuries. It was evident today on the 7yr auction that had solid bidding from indirect bidders; they bought purchased 48.3% of the seven-year notes compared to 43.1% average over the last 12 months. Also supporting our rate markets; our rates are much higher than those of G-7 countries. Is the US stock market does I fact continue to slip it will take down all other key global markets and in turn support even lower rates. That said we continue to expect the 10 will not fall more than back to 2.45%, and that isn't much from today's 2.51% level.

We need to follow-through tomorrow in the bond market from today's rally. The 10yr is at 2.51, one basis point lower than our resistance at 2.52%; all of the momentum oscillators we look at are now sitting at neutral; not bullish or bearish. If stocks decline again tomorrow that should turn all of our work back to bullish for the near term.

In summary, I am cautiously optimistic that we are about to break back into the long term trend of lower rates, but remaining right on the edge. The safest decision is to take the gains we've received over the last several days and lock. On the other hand, should you decide to float it could be big dividends, because if we move much lower it will likely start momentum toward a larger move. On my personal loan, I would float (I like to gamble) but I definitely would lock at any hint of a move higher from here.

Keep a strong look at the markets and continue to cautiously float if you do want to take a risk. Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.

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