March 4th, 2014 11:24 AM by Jackie A. Graves
Mortgage rates moved noticeably lower yesterday, as investors sought the relative safety of bond markets in response to geopolitical tensions in Ukraine. The mortgage-backed-securities (MBS) that most directly affect mortgage rates typically benefit when demand is high for safe-haven assets like US Treasuries. Current levels are right in line with those seen on February 5th. The most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution) is currently in the process of moving from 4.375% to 4.25% with both showing up today depending on the lender and scenario. When adjusted for day-to-day changes in closing costs, rates moved down by an equivalent of 0.05% today.
While there was economic data today that normally elicits a response in bond markets, Ukraine-related headlines set the tone instead. That can continue to be the case, but the bar will move higher in the second half of the week when the economic data gets more meaningful. This is especially true of Friday's Employment Situation Report. Between now and then, it's not a mistake to hold off on locking in the hope that rates could continue to fall as long as you understand why they're falling and how quickly it could change. No one knows when the situation in Ukraine will begin to improve, but once it does, it will make for compelling upward pressure on rates equal to the amount of compelling downward pressure seen last week and today.