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Overnight, stock markets around the world sold off due to continued debt concerns across Europe and tensions between North and South Korea. Stocks opened lower and another flight to safety led Treasury yields fell which pushed MBS prices higher. However before the day ended the stock market recovered all its losses to close flat on the day. Consequently both Treasuries and MBS closed near their weakest levels of the session. No lenders repriced for the worse though...but we did end the day on a sour note. Reports from fellow mortgage professionals indicate lender pricing to have improved slightly from yesterday’s repriced for the worse rate sheets...

I favor locking over floating at this point. There are just too many unknowns to deal with in the near term. The Fed stops buying MBS tomorrow, more Treasury debt supply is announced on Thursday, and then we get the all important Employment Situation Report on Friday. When the Fed stops buying MBS, the largest supporter of low mortgage rates will be removed from the market. While we do anticipate investor demand to remain strong, it may take some time for the secondary mortgage market to get comfortable without the Federal Reserve. This should present itself via added price volatility and the potential for larger movements in mortgage rates. While I still favor locking over floating for loans closing in 30 days, I understand why some folks might be consider waiting it out a few more weeks. Benchmark yields have risen significantly over the past week. Considering the big picture economic outlook has not changed (slow growth at best) since benchmark yields moved higher, it is very tempting to float through Non-Farm Payrolls on Friday. I caution though, this is a risky move, especially because the reward you will receive is not so great. There isn't much more room for rates to move lower, 0.25% at most. The safe move is to lock. ...

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 were pushed higher yesterday after benchmark Treasury yields moved higher, outside the well defined range that has kept rates relatively stable since August. New supply of Treasury debt combined with several psychological factors pressured MBS prices lower and forced lenders to reprice for the worse. Despite this move lower, we are not yet convinced this a long term move outside the range. The market is still very nervous about a stock sell off and another dip lower in the recession. This will likely keep demand for AAA rates Treasury debt high, which would foster a steady interest rate environment....