Mortgage Rate Update February 23, 2011

Mortgage rates are priced better again this morning.

Mortgage rates improved thanks to yesterday’s flight-to-safety in the financial markets.  Stock indexes in the US fell by nearly 2% and interest rates moved lower as investors ignored positive economic data and worried about the implications of growing unrest in Libya and other oil-producing countries.  Oil prices have surged to nearly $100/ barrel raising concerns that higher gas prices may spoil the economic recovery.

Moammar Gadhafi

Many analysts believe that Libyan President Moammar Gadhafi’s reign will likely end in the coming days.  Therefore, the surge in oil prices may be short-lived unless more major oil-producing nations fall into similar circumstances.
The US Treasury is back on the auction block today offering $35 billion in 5-year notes.  Yesterday’s 2-year note auction was decently bid.  Click THIS LINK to learn how government borrowing can impact mortgage rates.

In housing news, the National Association of Realtors reported today that existing home sales increased by 2.7% in January.  An interesting note in the report was that the percentage of homes sales completed by investors jumped to 23%.  The fact that investor participation is increasing may be a sign that home prices are nearing or have bottomed.

At this point interest rates have had a nice run lower.  It’s difficult to tell how long a flight-to-safety trade will last but at this point I’m inclined to switch to a locking position because the underlying fundamentals suggest mortgage rates should be moving higher.

Current outlook: locking