Chicago Refinancing Activity Surges Again

How low have rates gone in this most recent rally?  Low enough that the Mortgage Bankers Association is reporting a 21% surge in mortgage applications last week.

Today’s ADP report beat expectations.  In this week’s mortgage rate predictions, we cited the ADP report and Friday’s non-farm payrolls report as the big drivers for the week.  We still think Friday will be the definitive break out day for rates.  It still looks like the risk-reward is 2:1 in the favor of locking.  We’re still right at 5% on the 30 Year Fixed and it is probably equally likely that rates dip .125% or jump .25%.

Budgets that have $1T+ deficits mean that the Treasury needs to raise a lot of money.  Here is just next week’s schedule:

• $40B 3-yrs Tuesday
• $25B 10-yrs Wednesday
• $16B 30-yrs Thursday

Eventually this supply will put pressure on rates.  This is a graph of today’s pricing on a few securities.  While mortgage rates are currently unchanged, the 10 Year yield is up .33% today.   There is no direct relationship between the 10 Year and today’s mortgage rates, but they eventually need to head in the same direction. Fortunately today’s sell-off has been limited to Treasuries…so far.