Another Surprise Improvement In Today's Mortgage Rates 2-6-2018

By James Brooks

The bond market is down 10/32 (2.75%), but we still should see an improvement in Raleigh area rates by .250 of a discount point.

The day started innocently enough with stocks and bonds showing minor to moderate losses. Then stock selling accelerated rapidly during afternoon hours, causing the Dow to post its biggest single day point loss ever. As stocks spiraled downward, bonds benefited as investors shifted funds to escape the volatility. That led to a huge bond rally and widespread intraday rate improvements from mortgage lenders. Many lenders revised rates lower more than once before the day came to a close. This morning?s bond losses take away from yesterday?s gains, but we are still left with a nice improvement to mortgage rates.

Where do we go from here? That?s a very good question. I don?t think stocks are done yet and would not be surprised to see another noticeable loss before the end of the week. It will most likely be a far cry from yesterday?s loss though. Nevertheless, I still feel there is room for retreat in the stock markets. The more difficult question is how will bonds respond? By theory, stock weakness is good for bonds and mortgage rates. Therefore, mortgage shoppers should be happy to see more weakness. However, we saw such a sizable rally in bonds that I don?t believe we will see the same correlation to bonds that took place yesterday. In other words, stock selling is good but don?t be surprised to see less of a reaction in the bond market and mortgage rates if the major stock indexes give back this morning?s early gains. If closing in the near future and still floating an interest rate, today may be a perfect opportunity to lock.

There was no relevant economic data posted today. Nor will there be any tomorrow morning. The first scheduled event will be the 10-year Treasury Note auction tomorrow. It will be followed by 30-year Bonds Thursday. Tomorrow's auction is the more important of the two as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward afternoon revisions to mortgage rates. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.

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