Another Downturn in Mortgage Rates

Well you might have noticed (if not you will when rates get released today) but we have taken a dive off a cliff the last two days as it relates to mortgage rates. Mortgage Backed Securities have dropped over 120 bps points since open yesterday morning or 1.2% in the Fannie Mae required yield. What does all of this mean? Look for the 30 year fixed rate (when released this morning) to be 6.375% or perhaps even higher.

Why the huge increase in such a short time span? I could point to numerous reasons or influences as to why but the raw reality is simple; continued losses by big financial firms (i.e. Lehman Brothers Holdings) and a ever growing inflation concern. Combine these to negative factors with MBS and you will have a "fire sale" for Mortgage Backed Securities and therefore higher mortgage rates. This comes all while the DOW has traded sideways or even down. Some of you may have even heard reports that mortgage applications are at a 6 year low. Coming from the mortgage bubble and refinance boom that does not surprise me but you would think that mortgage applications would have at least held steady over April? This just goes to show what tightening lending standards, continued negativity in the media and volatile mortgage rates will do to an already fragile housing market.

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