Mortgage bonds are slightly positive this morning, as the bond market weighs which direction to go from here. From a technical viewpoint, bonds appear to be overbought. This means that we will likely see a sell-off occur in the coming days. Since bond prices are now near the top of a trading range, that would generally be the next move regardless. In the meantime, it makes sense to take advantage of the pricing now available. With no cost mortgage rates on a 30-year fixed currently at an APR as low as 4.375%, this is a great opportunity for those who have a rate above this level. Even if your current rate is only slightly higher, when there are no fees to close a loan, there is no time needed to breakeven. It’s a win / win situation.
Next week we will have another Federal Reserve meeting. Since there is no longer a concern as to the Fed deciding to raise interest rates, the markets will be listening intently to see if there will be any changes to the Fed’s balance sheet reduction plan. At some point, I anticipate the Fed will increase the level of 10 Year Treasury Notes and mortgage bonds they purchase. This is a form of Quantitative Easing, and generally would have the impact of reducing interest rates. Therefore, doing a no cost loan now and another no cost loan in the future could be the prudent strategy for you.
Given that bonds appear to be in an overbought position, we will maintain a locking bias.