Courtesy Tony Guaraldi
In short it’s been a blood bath in the bond markets, and last week we said our best guess was that there would be additional losses in bonds this week and that came true unfortunately. A look at the 2 year chart of Mortgage Bonds tells the story. With a quick glance you can see that bond prices were at a 2 year high in late September and are now near the 2 year low with the biggest losses coming in the past week and a half.
Such a sharp movement in mortgage rates is in a short period of time is not unprecedented but it is extremely rare, and I can’t remember ever seeing rates move that much in under 2 weeks. At this point we’re hoping the floor at 102.719 holds which is where pricing stopped today. But the concern is the 10 year Treasury yield is still rising again today and that will likely continue to put pressure on mortgage bond pricing. I don’t have any predictions for next week as we’re feeling 50/50 on the direction of rates in the near term so with all the volatility the safe play is to continue to have a locking basis.
Is there any silver lining??? Well we’re coming out of the historical lows in mortgage rates that bottomed out in 2012 and then hit near bottom again in 2016. But we have to remember some perspective in that there was never a 30 year fixed with zero points below 5% in history until 2010. Its seems hard to fathom now after having been at or near these recording setting rates over the past six years. But with rates moving up around 0.50% in the past couple weeks it’s worth noting to our buyers that a 30 year fixed below 5% is really an excellent rate compared to past history. I’ve included a link below to Freddie Mac’s rate survey showing average 30 year fixed dating back the 70’s and its really fascinating to look at. You only have to go back to 2008 to see rates in the 6’s with a points cost, and to the late 90’s to see rates in the upper 7’s with a points cost. If you dare look back to the 80’s . . . well you get the idea. Rates are up but they are still under 5% and that’s really fantastic compared to past history. So let’s encourage folks to get out there and take advantage while it’s still available!
30 Year Fixed rates going back to 1970’s CLICK HERE:
There were several Fed President’s talking today and wow I’ve never seen them give such clear language about being ready to hike the Federal Funds Rate. After the talks from voting Fed members today the economists are giving it a 95% plus chance of a Fed rate hike of 0.25% on December 14th. So that’s about as high of a percentage as you can get. Hopefully with the Fed hiking the short term rate that will help the longer term 30 year fixed and long term ARM mortgage loan rates stabilize and improve in the coming months.
CLICK HERE for the most current Mortgage RATE SHEET.
Tony Guaraldi, Managing Director