Okay, so far this morning, the market has reacted in a very volatile but not significantly changed manner to the jobs report. Essentially the jobs report came in pretty much where the market expected.
So, did I call it wrong by recommending a shorter term lock and a long term float guideline yesterday? I don’t think so for a couple of reasons:
- We’ve passed the major economic hurdle for the next few weeks without any news that is going to significantly lower rates. Between that and the fact that the new Reg Z rules essentially require locking in your rate at least 1 1/2 weeks before closing, it makes sense, if you are closing soon, to grab a rate and be done with it.
- One of the “big guys” at PIMCO was on CNBC this morning talking about how this is a “sugar high” rally that is based on inventory and cost control and stimulus funding (isn’t that what stimulus is supposed to do?) but that it won’t last. When reality hits, the stock market will adjust and the adjustment won’t be pretty. That has two potential options: 1) It would force money into the bond market driving down rates, or 2) It could cause money to jump to cash (remember last fall?) and everything would be really ugly. So I expect there is still some lower rate potential in the next 60 to 90 days.
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- Categories: Lenders, Mortgage Rates
Comments
3 Comments so far
Justin
Ok, so you called this one correctly but you were wrong for the entire month of August by continually advising to lock in due to a higher probability of rates rising. Well, that was not the case at all as we all witnessed rates dropping in August. You are quick to point out your right call but when you are wrong it seems that you stop writing.
Tom Vanderwell
Justin,
You don’t get what I’ve been saying. I said to lock because I thought there was going to be a part of the jobs report that would be “spun” into being good and it would spark a stock market rally. It didn’t happen that way. But I believe it was still a wise thing for those who did lock in before it.
Yes, all month, I’d been saying that I felt that the risk of higher rates was greater than the probability of lower rates. A couple of times, I used the 70/30 percentages. Yeah, so far, it came down on the 30 side. But I’ve also said that my philosophy about locking in rates is more about avoiding risk than it is squeezing out the last possible fractional percentage on rates.
Remember the saying, “Rates take an elevator up and the stairs down?” That means that rates will go up faster than they will come down. Helping people be prepared for that “swing” up is one of the reasons I write here because I believe it will happen.
Tom
Brian Brady
You didn’t call it wrong, Tom. The MBS market dropped .625%, on Friday afternoon. Readers who heeded your advice saved thousands of dollars yesterday