28 January 2011 – This week presented a huge amount of risk for rate watchers. With a slew of economic data, a Fed meeting, the State of the Union address and some T-bill auctions, there was the potential for rates to hit some new highs. Luckily, this did not occur.
From the government we got what we expected. The FOMC statement was very close to their last one with a general opinion that the economy is recovering at a less than desirable rate of speed and that a continuation of quantitative easing is necessary. The President’s address was generally well received, but the lack of any earth-shattering policy shifts meant that the financial markets were generally unmoved.
In the markets themselves, the T-bill auctions went well, earnings were mixed, housing and employment were expectedly bad, but not as bad as they could have been. In aggregate, investors were encouraged enough to keep the equities rally going pushing the Dow over 12,000. This had the expected effect on rates and the cost of borrowing did increase a bit from Monday’s open, but not enough to hit the panic button.
My mortgage rate lock advice for my clients is unchanged and still based heavily in defensive thinking. IF closing in 7 days or less LOCK. If closing in 7 to 30 days, I would suggest FLOATING with extreme caution. With this much volatility, I would LOCK on any improvements as well as any major upward repricing.
Update: Rate watchers may be rewarded today through fallout from the unrest in Egypt. Continued concerns about the region and continued instability have savaged equity markets with most indices showing over a 1% drop. This has bolstered the bond market and repricing is likely in favor of better pricing on Fannie Mae and Freddie Mac mortgage programs. I would recommend that anyone currently with a loan in process monitor these movements closely and strike if the opportunity for a good rate presents itself.

January 28, 2011
Daily Mortgage Updates