Direction of Mortgage Rates

Hello everyone,

Here's the latest on mortgage rates:

I have not written a commentary since the end of last month due to extraordinary factors affecting the markets of late and I wanted to let things settle before I made another comment on the market. First, the Sub Prime debacle is causing financial jitters throughout the mortgage and banking industries as high loan defaults finally catch up with lenders originating loans with loose credit requirements.

This activity has spilled over to the ALT A market which is causing havoc to lenders who originate conforming and ALT A business such as ourselves. The result of this is we will see more companies shut their doors, wall street continue to experience liquidity issues, and a mortgage market that will remain tight for most of the year.

Currently, the market is ignoring all fundamental indicators as traders of MBS's f(mortgage backed securities) focus primarily on the stock market. Since last week, when the DOW dropped 415 points, many investors in equity have switched to bonds for safety. This will begin to unravel by the end of the week or next week, as the stock market begins the recovery of the sell-off. This may hinder any rally we might get from poor economic data due to investors exiting the market.
So, I would remain cautious at these good levels as I feel that the market will sell-off to correct the stock market related rally of last week.


John Shea
Vice President
Summit Mortgage
781-224-2809 (office)
jshea@summitmortgage.com