Mortgage Market Update - Is the worst over?

30 year Conforming fixed rate at Par is hovering around 6.5%

After seeing rates increase by 1% over the last month are we finally at the end? Today Mortgage Backed Securities dropped below the 200 day moving average only to bounce back up. They are currently trading 19 bps up for the day after opening down 16 bps. This is a correction of 35 bps to the positive. While this isn't the coming of the Messiah, it is a nice change. While we might not see actual rate improvements today, at least they are not going up yet again. If this rally continues then tomorrow should see slightly better rates.

Over the last month we've seen the stock market soar which caused bonds to puke. many other countries raised their Prime Rates which caused money to be pulled out of America and invested overseas. This was confirmed yesterday when the Bond auction was met be mediocre demand from over seas investors.

But yesterday there was a glimmer of hope. I didn't print off the article, and it was on a service I subscribe to with a "ticker-tape" type of news feed. The article quoted some expert as saying that smart money was heading back towards mortgage backed securities. They have become a good value with a good rate of return and the likelihood of someone refinancing out in the next few years is reduced. Good for investors, but also indicates that they don't expect rates to get back to the lows seen over the last few years.

In addition, with European and Asian economies booming, they are in the same cycle as we are with fears of inflation and their Feds having to combat it by raising interest rates. We're pretty much stabilized now, but they probably have a ways to go. To me, this means that we are getting closer to the days of old where our economy will have a greater impact on long term interest rates and foreign investment in our bonds less of an impact.

Only time will tell.

Here's a link to my Daily Rate Lock Advisory

Larry Morris is a loan Officer with Equipoint Financial Network in Newberg, Oregon. He specializes in relocations and Sherwood, Oregon neighborhoods and Yamhill COunty. He is a Board Member of the Sherwood Chamber of Commerce.He can be reached at larry.morris@equipoint.com . His website is www.PDX-Mortgage.com. This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved. His opinions do not necessarily represent the views of Equipoint Financial Network.

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