We will maintain our locking bias

Mortgage interest rates are sitting right at highs reaching back to mid-July, 2015.  There has only been a limited number of days in over two years that rates have reached these relatively lofty levels, with the key word being “relatively.”  It seems the market has become so accustomed to outrageously low mortgage interest rates that a ½% jump higher has put many financial pundits and media personalities in a tailspin.  Some are over dramatizing the impact this will have on our housing market.  The key point to remember is that anticipated increased economic strength is the primary driver of the rate increase we are experiencing.  This means a stronger demand for home purchases and upward pressure to home values; both of which are good for the housing market.

Last week was a tough week for mortgage bonds, with interest rates climbing higher.  A look at the current bond chart gives reasons to support the hope that we may have hit the bottom of the current trend and we that bonds could be ripe for a temporary (at least) reversal.  Both mortgage bonds and the 10-Year Treasury Note are in extreme over-sold positions.  In fact, you would have to go back to June 2007 to see the 10-Year Treasury as oversold as it is now.  This could be a forward indicator of a near-term higher demand for both investments.  That would bring at least a temporary reprieve to the move higher in interest rates and could re-establish hope for reasonable rates heading forward. 

Until bonds have convincingly stabilized, we will maintain our locking bias.