When Are Mortgage Rates Going Back To 2009 Lows

[tom.champion]

I have been reading the blogs on several website with Originators asking the question, when will mortgage interest rates come back to their lows of 2009? All of the chart watchers, technical analysis, talk about moving averages, this curve that curve, so on and so forth. Warren Buffet said it best with two comments, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" and "If past history was all there was to the game, the richest people would be librarians." In a normal market the charts may give you insight to the possible direction of MBS trading however there is nothing normal about this MBS market.

Today's MBS market trading requires you to focus on the fundamentals. What are they, massive FED debt, inflation concerns, ability for US to repaid all of its debt, falling value of US dollar, high unemployment, residential housing prices still declining, pending crisis in the commercial real estate just to name a few.

Today our annual deficit went over 1 trillion dollars with an expectation it will be over 2 trillion dollars by year’s end. This is the first time in American history we have had a trillion dollar plus annual deficit. With this current deficit the citizens of the United States of America owe over 50 trillion dollar when we combine the US commitments for the on and off balance sheet items. How much longer will the world’s investors give us before they think we are now a subprime borrower? These investors are already asking for higher Treasury rates for the perceived risk without any inflation. First day of trading this year the 10yr Treasury had a yield of 2.46% today 3.42%, think what will happen when inflation raises its ugly head.

Unemployment is currently at 9.70% with many forecasting it to go over 10%. Simply put if this rate of unemployment continues individuals will need to sell their home or lose them to foreclosure. Both alternatives put more homes on the market continuing to lower prices. Lower home prices helps with the affordability concerns for a purchasing borrower however anyone that has originated loans for any length of time knows there is always a balance between home prices and interest rates. More inventory with lower prices will result in higher mortgage rates.

Back to my original point we aren’t going to revisit the lows of this year for any length of time instead mortgage rates will move higher the question is how quickly and how much. Today’s Originator must have a live MBS, Mortgage Backed Securities, data service to protect their income from these immediate negative price changes. Don’t rely on one that gives you only technical analysis, charts. Select a MBS trading data service like Rate Link that combines technical, charts and fundamental, current conditions, analysis for their float/lock recommendations. If you miss a borrowers interest rate expectation they won’t close and you will have done all of the upfront work for no income.

Again don’t rely solely on MBS charts. I can only think of a one things that can ruin your day more than watching your pipeline lose most of its value, your income, because rate went up like a rocket on mid day breaking financial news or a data release.