Memorial Day Messes With Mortgage Rates

May 24, 2011 at 8:45 am Leave a comment

Vacation weeks are rough on mortgage ratesMortgage rates across the state are near year-to-date lows, but locking them in this week may be difficult. As Memorial Day nears, and Wall Streeters get a head-start on the long weekends, trade volume in the mortgage bond markets will dip.

When bond volume drops, mortgage rates get jumpy. It’s a relationship based more on scarcity than actual market fundamentals.

It works like this:

  1. Conforming and FHA mortgage rates are based on the “market price” of a mortgage-backed bond
  2. Mortgage-backed bonds can’t be bought or sold without a buyer and a seller at a specific price

As Friday gets closer this week, and more and more Wall Street traders will leave for their “extended” 3-day weekend, and bond markets will be left with fewer and fewer participants. This will create a market situation in which it’s harder to match a buyer and seller at any given bond price, resulting in larger mortgage rate shifts than usual.

These jumps in rates are exaggerated during periods of economic uncertainty like these. What’s more, there’s a lot of economically-important data due for release this week. That, too, can put markets in hysterics.

If this were a “normal” week, mortgage rates would be volatile. The coming of Memorial Day is just adding to the mix.

Mortgage rates may rise in East Lansing this week, or they may fall.  Either way, if you have the opportunity to lock something favorable, consider doing it.  Rates are low and likely won’t last.

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Entry filed under: Mortgage Rates. Tags: , .

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Don Grimes

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Don Grimes
"Your Residential Mortgage Specialists"
Senior Mortgage Loan Officer
NMLS: #130686

Michigan Mutual, Inc
Office: (517) 507-0151
Toll Free: (800) 521-1642
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www.DonGrimes.com

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