Locking bias

Locking bias

Mortgage bonds climbed higher yesterday, stopping dead in the high level we saw back in early August. Although great news for borrowers looking to lock in right away, this increases the risks for those looking to lock in a few days. Recent history hasn’t been favorable to mortgage bonds when they hit this level. Therefore, we must be cautious in deciding when to lock vs continuing to float. In times like this we generally suggest locking when at the top of a channel and floating when near the bottom. We are right up against the top, which is a risky place to be. If bonds are able to muster the strength to make a break higher, we could see some nice improvement to the APR of mortgage interest rates. We will have to wait and see how things play out today.

 

With little economic news reports scheduled for today, markets will again trade heavily based upon the technical picture. We know that investors will likely become more protective of their investments ahead of the Fed’s interest rate announcement scheduled for September 21st. Although there is little expectation of a rate hike announcement, many pundits continue to stir the markets with fear based rhetoric to attract a larger audience. We all understand the role of the media. Although we have a general distrust for their words and actions, they still have the ability to scare markets into thinking something is possible even when the chances are very low.

 

With bonds at the top of a sideways trading channel, the risk / reward scale still favors a locking bias.