Tracking Mortgage Rate Movement Around A 3-Day Weekend

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Need to lock a loan this week? Get on it.

No Traders = No Trading

Mortgage 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, mortgage bond market trade volume will dip.

When bond volume drops, mortgage rates get jumpy. It's a relationship based on scarcity; not actual market fundamentals.

Mortgage Rates Patterns On 3-Day Weekends

Mortgage rates get goofy ahead of 3-day weekends such as Memorial Day, Labor Day and Independence Day. Here's why:

1. Conforming and FHA mortgage rates are based on the MBS "market price"
2. Mortgage-backed bonds require buyers and sellers at a specific price to sell

So, as the Friday before Memorial Day approaches, more and more Wall Street traders will leave for their "extended" 3-day weekend. This will leave the bond market with fewer and fewer participants.

The subsequent shortage of traders will then create a market situation in which it's harder to match a buyer and seller at any given bond price, which results in bond price swings that are larger-than-typical. Mortgage rates follow larger swings, too.

We saw this first-hand last year.

In 2010, during the weeks leading up to a 3-day weekend (e.g. Martin Luther King, Jr. Day, Labor Day), MBS pricing was more erratic than during the week prior in every case save for one.

Get A Rate Quote And Lock Your Mortgage Rate

Mortgage rates may rise 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.

You can click here for an online rate quote. I'll send you rates right away.

(This post adapted from Bring the Blog, a blog-writing service for loan officers)