Florida Mortgage Rate Forecast – August 18, 2010

by Florida's #1 Mortgage Planner on August 18, 2010

Locking Stance:  CAUTIOUSLY FLOATING     Mortgage Bonds:  +0bp

Yesterday, mortgage backed securities headed lower and even got us a little itchy to switch stances, but they continue to hold along their 10-day moving average for the 4.0% coupon.  The 3.5% coupon, probably a little more pertinent to where mortgage rates are headed, continues to hold above its 10-day moving average.  There remain concerns on both charts, so our finger is still a little “itchy” right now, but we will wait and see if the trend holds.

Data is rather scarce and certainly not typically market moving even when it is released, so technical factors and news will be driving the markets today.  That is both good, and bad.  MBA Purchase Applications showed that Purchase Applications dipped 3.4% while Refinance Applications rose 17.1%.  This can be expected as mortgage rates remain low and the housing market continues on its death bed.  Crude Inventories was just released and its main play is how oil prices react and spillover into the markets.  Crude Inventories came in at –0.8M, which shrunk less than last week, and oil prices are down 1.44 right now, so it should not effect MBS prices much, if at all.

Looking at the charts right now, namely the 3.5% coupon mortgage bond (FNMA), we see a resistance layer holding strong after a retracement.  We also see the 10-day moving average holding strong, thus creating a squeeze play in the shape of an ascending triangle.  This is generally a continuation pattern, so the odds are that MBS prices will resume their uptrend at this point, especially with stochastic indications dropping below the overbought spectrum.  However, the concerns come when we look back at the 4.0% coupon mortgage bond which is resting along its 10-day moving average, but just below it and struggling to get back above it.  Between the two, the 3.5% is likely the better forecaster, thus odds remain favorable for mortgage rates to hold steady or improve from here and we should know for sure tomorrow, especially after the Philadelphia Fed Index is released.

What does this mean for Florida Mortgage Rates?  Mortgage rates are holding steady right now and likely will do so throughout the remainder of the day.  The overall outlook remains favorable for steady to improving mortgage rates, maybe even setting new record low mortgage rates, but there are some concerns.  We should know the outlook solidly tomorrow.

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