Rate Update November 21, 2008

Mortgage rates are unchanged this morning.

In Tuesday’s ‘rate update’ we mentioned the unorthodox technical trading patterns that the mortgage-backed bond (MBS) market was experiencing.  Today marks 13th day that MBS prices have traded at or near the 200-day moving average price line.  This is unprecedented.  A look at the bond chart below shows bond prices over the previous 90 days.

The first box shows MBS prices moving sharply away from the 200-day moving average (October 2008).  The second box shows MBS prices hovering around the 200-day moving average.

Unfortunately it looks as if MBS prices are poised to move lower which would push rates lower in the near term.  However, in the long-run we believe that deflationary pressures could push mortgage rates lower.

Current outlook: Locking in near-term/ floating in long-term