Daily Mortgage Market Information

The mortgage market has had a terrific rally over the past month or so - with the contract rate for 30-year fixed-rate mortgages moving to a new all-time low.  While historically low mortgage interest rates are good news for borrowers and mortgage originators - it is nervous news for mortgage investors since the price of the underlying mortgage-backed securities these investors are currently buying has just touched an all-time record high. 

The growing for these buyers of mortgage-backed securities is that they will be caught holding the bag should the great rally in the mortgage market come to a sudden and screeching halt.  In order for current buyers of mortgage securities to make a profit on their just completed transactions - by necessity they will have to find a ready, willing and able party eager to pay an even greater price for the same security.  If this "greater fool" is nowhere to be found - current mortgage investors will quickly realize they have made a major financial blunder -- and will immediately begin scrambling to unload their mortgage assets as quickly as possible to minimize the financial pain. The more selling pressure this activity creates -- the more desperate sellers will become and the harder it will be to find buyers - a scenario, should it develop, marked by surging note rates. 

Mortgage investors will be keenly attuned to tomorrow morning's August nonfarm payroll data.  If the headline payroll number matches or exceeds the consensus estimate for a loss of 100,000 jobs -- and/or the national jobless rate creeps up 9.6% or higher -- mortgage investors will breathe a sigh of relief as mortgage interest rates trade steady to fractionally lower.  Should the August nonfarm payroll report indicate 75,000 or fewer jobs were lost during the month -- and/or should the national jobless rate post a reading of 9.5% or lower -- the race for the market exists will be on - with mortgage interest rates moving higher and prices slumping sharply lower.  This latter scenario carries a lower probability of actually occurring - though not so low that it can be discounted completely.