What is Happening in the Mortgage Market

Mortgage rates are holding steady this morning. This on the heels of yesterday's steep selloff of bonds- so what happened? The overall Bond market was hit with a double whammy, which pressured prices lower throughout the entire day causing mortgage rates to rise dramatically.

First - the Treasury announced that it was going to sell $162B worth of Bonds next week. That is an enormous amount of paper that has to be absorbed by the market and the additional supply may make it difficult for Bond prices to make any meaningful gains. The Government has to issue all this debt and much more to pay for the massive stimulus programs.

Because of the additional indebtedness that the US now has to take on - literally mortgaging the future - there are concerns as to our government's ability to service this debt without having to print additional money. Beating the drum on that specific issue was Pimco's Bill Gross who more or less said, the US will eventually lose it's AAA credit rating. Although he did not see this happening anytime soon an already jittery Bond market sold off further.

The New York Federal Reserve purchased another $25B in Mortgage Backed Securities from May 14 through May 20, bringing the year-to-date total to $482B, out of the $1.25T that has been allotted. The coupons ranged from the 4% to 6% with no purchases of 3% or 3.5%. Rates can't improve much further unless the Fed goes in and buys significant amounts of the 3 to 3.5% Bonds.

There are no economic reports due for release today so rates should hold steady today. 

Get a free pre-approval or mortgage analysis by calling or appling online at www.mortgageprosus.com   972-661-5136 local or 866-430-7767 toll free.

Richard Woodward

Banker / Senior Branch Manager

Because You Deserve The Best

Office: (972) 661-5136

17311 Dallas Parkway Suite 173 Dallas, TX 75248

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