Rates up yesterday but outlook is to remain low

As you may have heard, the market went bananas yesterday so here is a quick analysis.

The mortgage market was so volatile yesterday that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day. Mortgages significantly sold off yesterday afternoon. The 4.0% and 4.5% was down over 2.25 pts and 2 pts respectively. The reason is that there was an excessive dumping of supply. Servicers and banks were selling and more notably, the Fed never came in and made any purchases. There’s more room to fall and the expectation using technical analysis shows we could sell off by another point over the coming days. Volatility is through the roof which makes hedging expensive and tough. Still the sentiment is that the Fed is expected to keep purchasing and keep rates low.

Rates have relaxed slightly today. Some may see short term ARM interest rates as a more attractive option while fixed rates stay north of 5%.