Mortgage Rate Update January 16, 2014

Mortgage rates have worsened slightly this week. This is not a huge surprise given the gains we saw following the weaker than expected jobs report this past Friday. This is why we took a locking bias on Monday.

Mortgage rates have reacted to technical trading patterns this week. After the weaker than expected jobs report last Friday mortgage-backed bond (MBS’s) prices spiked higher, pushing rates lower. However, the rally stalled at the 100-day and 50-day moving averages which is where MBS’s are currently stuck.

In order for mortgage rates to improve further MBS prices will have to break through this technical layer of resistance.

Aside from last week’s jobs report most of the economic data out this week has been unfriendly. Retail sales, inflation, and economic activity have been reported hotter than expected throughout the week. Good news for the economy is often bad news for mortgage rates.

Given that rates are trading up against technical resistance AND our long-term outlook remains unchanged (I expect rates to rise throughout the year) I will maintain a locking bias.

Current Outlook: locking bias