Rate Update November 16, 2010

Mortgage rates are unchanged from yesterday.

Mortgage-backed bonds (MBS’s) suffered the worst one-day loss since June of 2009.  Over the previous 5 trading sessions MBS’s have dropped by a whopping 334 basis points and fixed mortgage rates have increased by .375%-.625%.  Ouch!

Fortunately we went into a locking position ahead of these increases so hopefully you took advantage of our advice.

MBS’s are trading in positive territory this morning on technical trading support and economic data.

Concerns over European debt are back in the spotlight again.  The EU has been working closely with the government of Ireland to make sure they avoid defaulting on their debt.  This has pushed some investors into the US which helps drive yields lower.

The Labor Department reported that prices at the wholesale level of the economy grew by a modest rate in September.  When you back our volatile food and energy prices we find that wholesale prices actually declined last month which lends credit to the Fed’s latest QE2 move to avoid deflation.  Inflation is the primary driver of mortgage rates so this news is positive for mortgage rates.

We may see rates stabilize here for a day or so but there is a lot of momentum behind rates moving higher so the long-term play is to lock.

Current outlook: floating in the short-term, long-term trend suggest locking