Mortgage Rate Update December 6, 2012

Most note rates are unchanged this morning but pricing is slightly better compared to the beginning of the week.

Nothing much has changed in the political or economic climate.  The latest reports suggest the GOP may be willing to compromise on allowing the top two income tax rates to rise in exchange for further cuts in entitlement spending and tax code reform.  Are we any closer to a budget deal to prevent going over the fiscal cliff?  If so, mortgage rates may rise a little due to a reduction in uncertainty.  However, given the fact that rates have not increased tells me we’re still likely to go over the cliff or have be headed for a last minute deal.

The all-important monthly jobs report is due out tomorrow and the markets are expecting only 86,000 new jobs created.  On Wednesday, the ADP report indicated 118,000 new jobs were created last month.  If the report is weak as expected I doubt the mortgage rates will get much of a push lower.  Investors understand the impact of Hurricane Sandy is likely to make this month’s report an outlier.

From a technical perspective the 10-year Treasury yield is currently trading at a level of resistance.  If the technical level holds then rates are at risk of reversing higher.  This is a little concerning because mortgage backed bonds have traded in a tight range over the past week which can be a signal of a sharp “break-out”.  I think risks favor locking.

Current Outlook: locking