Mortgage Rates December 11, 2008

Today MBS tested the 102.80 range and quickly pulled back, still ending the day 3pb in the green at 102.59375.  If you watch technical’s we could see a pull back at this point, on 12/01/2008 we saw the MBS pull back after reaching 102.5625 today’s close is only 3bp higher than the last pull back.  Given we are heading into a weekend and in down markets sell offs occur at the end of the week and rallies start on Monday, the flight to security could buoy well for MBS.

Historically ARMs price and perform better than Long Term rates; in an age of bailouts this is proving NOT to be true.  With government intervention and lingering questions about the economy, fixed-rate mortgages are now pricing cheaper than their adjustable-rate counterparts.

Based on today’s mortgage market, a Fixed rates pricing is superior to  a 5-year ARM.  Conforming fixed-mortgage rates are priced roughly 0.250 percent lower and have been over the past 19 days.  The quarter-percent difference equates to $33 saved per month on a $200,000 home loan.

Mortgage markets are ever-changing so rates we can’t know if this pricing anomaly will last.  But, while it does, the decision to choose Fixed over ARM is a lot simpler.

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