18 February 2011 – This week, we finally saw a return to normalcy. For months, mortgage professionals have felt like we had stepped through the lending looking glass into some Carrollesque world driven by completely different laws of nature and physics. We have been scratching our heads, perplexed by the mortgage markets ability to repeatedly perform counter to conventional wisdom. Time after time, we saw negative or tepidly positive economic news result in rate increases. This finally came to an end this week as mortgage pricing responded as expected.

The week started with a bit of uncertainty. We had broken a 5-day period of upward mortgage pricing, but still stood on the edge of a precipice with the very real possibility of further increases. We had been down this road before with painful outcomes. Patience was rewarded for some, however, as uprisings in Egypt spread to Bahrain, Libya and even Iran. Since nobody is sure how the Middle East is going look after the dust settles, the equities markets were presented with an uncertain outcome for a crucial global economic region. In addition, many of the economies of this region came to a screeching halt making T-bills more attractive as a safe haven further helping rates. Along with the Jasmine Revolution, we saw a 25,000 increase in jobless claims and a bankruptcy filing at Borders, which sent a strong signal that the economic recovery is still in first gear.

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My mortgage rate lock advice is slightly changed from last week. I would still advise that most ratewatchers LOCK, but, if you are closing in 7 – 15 days, you can cautiously FLOAT. In short, things have changed a bit and some opportunity for rate improvement exists, but this opportunity will likely be fleeting. There is still considerable risk of a rapid shift to the rate increases.