Rate Update August 28, 2009

Mortgage rates are essentially unchanged from yesterday afternoon.

Mortgage-backed bond (MBS) prices are now trading within a tight trading range in between technical layers of support and resistance. This is illustrated in the chart below- MBS prices have remained between the blue line on the top and grey/ black line on the bottom for the past 7 trading days.  When MBS prices enter a range such as this it is difficult to predict which way they will “break-out” but usually they leap one direction or the other which drives rates (either better or worse) for the days to follow.

MBS prices Aug. 28
MBS prices Aug. 28

This scenario is made more difficult by the fact that we are entering the “dog days of summer” when there are not as many traders in the market which can lead to more volatility.

Mortgage rates remain very attractive so the safe play is to lock and take your “chips off the table”.  However, we do believe that rates have a chance of moving lower form current levels.

Current outlook: neutral