Rate Update January 20, 2009

Fixed mortgage rates are substantially higher this morning.  

 Mortgage Bonds are attempting to rebound from earlier morning losses but there is still a long way to go. 

 Currently Mortgage Bonds are down 12 basis points on the day as they had been down as much as 41 basis points.  Even though they have started to rebound a bit, it doesn’t look like many lenders are changing their prices from earlier this morning.  Remember a post from a couple weeks ago, when I speculated on why lenders where actually raising rates even though mortgage backed bonds were gaining ground in the market; this may be a similar situation.  Lenders are feeling overwhelmed right now with the number of refinances that are making their way through the system…a system with a lot less capacity than a year ago because of all the layoffs from 2008.  It is likely that these lenders are keeping their rates high after this morning’s sell off of Mortgage backed Bonds so they can catch up a bit.

 With Mortgage Backed Bonds trying to bounce off the floor of support at the 25 day moving average, we will maintain a floating stance in the long term.

 Outlook: Cautiously Floating