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Yesterday I informed you that the most significant threat to mortgage rates was today's 10 year Treasury note auction and the 30 year bond auction scheduled to happen tomorrow. Well, benchmark yields started rising before the auction even occurred! This forced MBS prices lower and resulted in lenders raising mortgage rates early in the day. Higher rates did not reverse course after the auction either, regardless of strong demand. ...

Reports from fellow mortgage professionals indicate mortgage rates to be similar to yesterday’s. The par 30 year conventional rate mortgage remains in the 5.00% to 5.25% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par rate of 4.375% to 4.50% with similar costs. There are currently two thoughts regarding the recent move higher with mortgage rates. One side is saying that this is the start of higher mortgage rates which will continue into next year as the economy continues to improve. The other side of the argument is the recent move higher isn’t an indication of a trend for rates next year but rather due to very low volume of activity due to market participants being on vacation over the last two weeks of the year. What is your opinion? Do you feel the move higher in rates will continue into next year and the days of rates under 5% are over? Or do you feel once the first team traders come back to work from their Christmas vacations that much of the losses we have suffered will be recaptured and rates will once again move below 5%?...

Mortgage rates fell a few basis points yesterday as benchmark Treasury yields moved lower in the range. The extended rally in the rates market helped MBS prices tick higher which eventually resulted in lenders repricing for the better. An above average turnout at the 5yr note auction combined with an unexpected drop in New Home Sales helped spark the move lower in yields . To remind readers, as prices of MBS move higher, lenders are able to pass along lower mortgage rates. ...

The well defined range we have used to gauge our lock/float sentiment is being challenged. Since the range proved itself a reliable indicator of demand for debt in the benchmark fixed income market, we have advised consumers to lock when mortgage prices were near the high side of the range and to float when MBS prices were at the the low side of the range. Well...this morning the range broke and prices fell through a key level of support. While we are not in panic mode, our preferred indicator of lock/float strategy is being put to the test. ...