Locking bias

Locking bias

Mortgage bonds have taken it in the chin this morning, as the stock market continues to drain money out of the bond market in search for higher returns.  The seemingly unstoppable stock market again finds itself within striking distance of all-time high levels.  The strength of the recovery that has followed the mid-August market correction has been impressive.  The wide swings in stock prices has created an optimal environment for the savvy day traders who are able to profit from market movements, regardless of the direction.  This exaggerates the volatility within mortgage rates and leads to wide swings from week to week.

 

Many economists are coming out with their 2016 financial market predictions.  One common thread amongst the majority, point towards 2016 as being a year for higher mortgage interest rates.  The challenge with listening to economists is that they are often wrong in their predictions.  It’s too easy to blame global events or other external factors as their reason for inaccuracy.  Although the past years have proven to be different than many projected, there appears to be a much higher probability that mortgage rates will rise a bit in the coming year.  Either way, it’s key to know that markets move based on many factors.  The Fed raising short term interest rates can actually help lower long term rates, which include 30 year mortgages.

 

Given the continued weakness in the bond market, we will maintain our locking bias.