Locking bias

Mortgage bonds started the day above their 25 day moving average, but were quickly pushed back below. They are now trading back within the sideways channel, trapped between their 25 and 50 day moving averages. As the two moving averages tighten, bonds will be forced to make a decision as to which way to make a break. Given the continued weakness in the bond market, an unwanted break to the downside is becoming increasingly more likely. That’s bad news for mortgage interest rates, as the next significant floor beneath the 50 DMA is the 100 DMA. However, that floor is about 50 basis points below the 50 DMA, which represents about 1/8% higher interest rate on a conventional 30-year mortgage.


The FHFA Housing Price Index, which measures single family home values, with conforming loan amounts, showed an increase of 0.2% for the month of June. Although slightly below the market’s expectations of 0.3%, this still is a healthy report. On a year-over-year basis, home values appreciated at a rate of 5.6%. ¬†Appreciation rates between 5.5% -6% represent a Goldilocks number, meaning not too hot and not too cold. Since this number reflects a national number, each city and state has its own report. Feel free to reach out to us for information regarding specific areas in which you have interest to know current appreciation rates.


With mortgage bonds still showing lackluster performance, we will maintain our locking bias.

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