Happy Hump day. Here's the thing - financial markets HATE uncertainty. As I was watching the election show last night they talked about the Dow futures a couple of times and how much they were down when they started thinking that Trump was going to win. They talked about how Trump is an unknown as far as how he'll govern and that the markets are reacting to this uncertainty. As you now know, Trump won and the stock markets are loving it for the time being as they are all up somewhat nicely. Usually, when there is uncertainty in the world, stocks sell off and money moves to the safe-haven investments of bonds which is what it was looking like last night but this morning is a completely different story. The stock market indices are all up somewhat significantly while bonds are selling off. In the case of the FNMA benchmark bond, it is down which is a bit over a .125% increase in rate.
While the media chose to focus on Trump as an unknown from a political perspective, I look at him as a known commodity in terms of a businessman. To me, it makes perfect sense that a businessman would implement policies that are friendly to business which means an opportunity for growth. This is what the financial markets are keying on this morning and with growth comes inflation and that means higher interest rates. While people who are getting mortgages may not like the prospect of higher interest rates, growth also means more jobs with more opportunities and higher wages for more people. Higher rates are a sign of a strong economy and rates have been low for so long because the economy has been week for so long. Maybe the "new norm" of low interest rates won't be the norm for long and that's not necessarily a bad thing from a bigger perspective. I would, however, recommend locking and cutting your losses. I'll be locking a client today (it's the first day he was eligible to lock or I would have locked before the elections). If your lender has a float-down option, you might be able to take advantage of it if the bond market turns after such a drastic reduction but I wouldn't count on it.
As always, feel free to contact me if I can help with anything mortgage-related. 801-893-1737 or 702-812-1214. firstname.lastname@example.org. If you do float, keep a close eye on the bond market.
UPDATE: As of 3:07 EST, I am thinking the bond has fallen far enough (down 97 basis points) that if you haven't locked, you may want to float. I can't help but think there will be some rebound off of what I think is an over-reaction. As always, keep a close eye on the market.