Mortgage Market Recap for the Week Ending 12/19/08

I’m on a roll!  Last week I predicted the 10-Day Moving Average would continue to provide support - and it has!  Mortgage rates have to continue to improve.

Let’s look at the week that just passed first - then look ahead to the coming week to see what we can expect moving forward.

Look at the candlestick chart of FNMA Mortgage Backed securities (30-Yr 4.5%) below. The first support line was resistance one week ago - and the 10-day moving average was below support.  I thought the 10-day would hold and mortgage bonds would continue to move higher - and they have. Remember that higher means lower rates.

Tuesday was Fed day (moving the Federal Funds Rate to a target range of 0% to .25% - remember that Prime is FFR + 3%) with many in the media wondering why the Fed moves this year haven’t translated into a commensurate savings in mortgage rates.  It’s a funny thing about the FFR - mortgage rates have nothing directly to do with it.  Many have also wondered why mortgage rates haven’t moved lower in step with the movement in the 10-Year Treasury Note. Once again, mortgage rates aren’t connected to the 10-Year T-Note. It’s all about mortgage backed securities. That’s the beginning and the end when it comes to fixed rate mortgages.

And here’s the strange thing about how the pricing of mortgage bonds has translated into mortgage rates: While mortgage backed securities are being traded throughout the day - and some days improve towards the end of the day (as happened on Friday) - the best pricing is typically seen in the morning regardless of improvement in the afternoon (or a lack of deterioration). It’s as if investors are saying “we’re in the game in the morning - but somewhere between 2p and 3p Eastern, we’re out.”

So here’s your strategy for getting the best possible mortgage rate: Lock in the morning with your mortgage lender. And work with a mortgage lender who offers free float downs to market rate should the market improve further. This makes a big difference when it comes to locking strategies for folks buying a home as well as those refinancing.

So what do I see coming this week? I’m going to continue to believe in the 10-Day Moving Average - and steady progress higher (lower rates). Monday morning should be fantastic as I read Friday’s technicals. To that end, I’ve been telling my clients, get your social security number, and the rest of your vitals in to me - so I can get you locked when pricing comes out in the morning. There’s no risk: should the market improve, I’ll float you down to the lower rate. If the market worsens - you’re locked, and have nothing to worry about!

If you have any questions about financing your home purchase - or refinancing your existing mortgage(s) - please give me a call on my personal cell. I’d love to help! 970-691-9933
Thanks for reading!

I’ll post back soon,

Ken