Mortgage Rates at Seven Year Highs

Mortgage bonds are hanging in so far this morning, holding mortgage interest rates right at more than a seven-year high. This is an uncomfortable and critical position for mortgage bonds to be in. If bond prices fall beneath current levels, we could see bond prices make another large fall. Since bonds are now in waters that haven’t been chartered for more than seven years, we must go WAY back in time to find support that could slow the price drop. Let’s hope prices hold and gain positive momentum from here.

Stock prices are holding near flat-line this morning, holding just beneath their 200-day moving average. I would expect stocks to make another run at this critical level at some point this week. My guess is that they will eventually make it above this level, even if they first must go through a couple more failed attempts. When stocks do exceed this level, that will add a significant headwind to the bond market, as investors will likely sell bonds to take advantage of the opportunities of the stock market. That could be the catalyst for mortgage interest rates to set new multi-year highs.

With bond prices holding, there is no need to immediately lock. However, I see little hope of rates making significant improvements. Therefore, we will maintain a locking bias.