After quite a bumpy couple of weeks, the mortgage market finally caught a break when Bernanke announced that the Fed would make 200 billion dollars available in a short term auction. Why is this good for rates? Because the participating dealer banks will be able to trade in their Mortgage Backed Securities for Treasury Bonds. In effect, this means that the Fed is knowingly buying a more risky asset in order to provide more much-needed liquidity for mortgage lenders.
So this is a shot in the arm for mortgages as they'll have more money to work with. It also eases investors concerns about liquidity and quality. If investors are less concerned about the risks of something, they will buy more of it. If they are buying more mortgage bonds, this raises their price which lowers interest rates.
Today is shaping up to be another good day for mortgage rates.
The economic data is very limited today with the relatively unimportant MBA mortgage application report. There were no huge deviations from expectations, and basically, we are still far off from where we were last year, but the slightly good news is that purchase applications did exceed expectations by a bit.
When there is limited scheduled economic data, traders are more at the whim of market sentiment, so if we start to pick up momentum in one direction or another today, we could see some big changes. For the time being, float, but check back for updates on the professional blog which is updated with potential changes and lock recommendations throughout the day.
As for this morning, our best 30 year fixed rates from wholesale lenders should be offered in the sub 6% range.