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The biggest single day point drop in the history of the Dow Jones Industrial Average was the primary source of motivation in the interest rate market today. Yes you heard that right. At one point the Dow was down nearly 1,000 points! This led to a massive flight to safety and higher mortgage-backed security prices. The media is reporting the sell-off took off as a result of a trader error, either way weakness in stocks and global economic fears allowed lenders to reprice for the better and lower mortgage rates today. ...

Tomorrow we get the most important economic report, the Employment Situation. If this data indicates fewer job losses than expected, mortgage rates could rise very quickly. If worse than expected we could see an improvement to rates; however, I am going to continue to advise locking because lenders have proven themselves reluctant to pass along lower mortgage rates once 4.50% is reached, which we saw earlier this week. If you can lock today at 4.625%, why risk floating if lenders won’t offer rates below 4.50%? Not much to gain but there is a potential for a quick and large move higher with rates, so much to lose. ...

The big news this morning comes out of Dubai, which announced they were not going to be able to honor their debt repayment schedule. They are asking for a six month reprieve on debt payments. This is causing a flight to quality bid as many investors sell riskier assets and buy the safest asset there is, U.S. Treasuries. Since MBS tend to play folllow the leader with Treasuries, MBS prices are moving higher this morning.Reports from fellow mortgage professionals indicate lender rate sheets to be similar to what we had on Wednesday. This keeps the par 30 year conventional rate mortgage in the 4.50% to 4.75% 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. There are several lenders offering 4.375% for consumers with exceptionally high FICO scores and loan to values under 60%. ...