There was a huge rally in the bond and mortgage backed securities (MBS) markets this afternoon. The rally came after the FOMC meeting that was held yesterday and today. The Feds have announced that they will purchase up to $300 billion in long term bonds in the 3^rd and 4^th quarter of this year. On the news, the 10 year bond rose in price by over 400 basis points (yields dropped). 1 basis point is 1/32, so the 10 year bond rose more than 128/32 in 30 minutes of trading this afternoon.

The Feds also announced that they intend to purchase up to $750 billion in mortgage backed securities over the same period. Upon the news, the price of MBS rose more 100 basis points (yields dropped) in the same 30 minutes. At this writing, MBS is up 119 basis points (1 6/32) which will translate to lower rates. Some lenders have already repriced for the better this afternoon, but not enough in my taste to warrant locking in now. Other lenders are holding back. I fully expect an improvement in mortgage rates tomorrow morning - some will improve by as much as 1/4% in the rate. That means if the rate is 5.0% at no points today, then it should be 4.75% at no points tomorrow.

Keep your eyes open, get those application started and get going – remember what happened in early January could happen again – rates dropped, but didn’t stay down very long. We’ve been struggling to get back to that level for the past 2½ months. Also, lenders well get swamped with applications very quickly, will slow up the process, and will keep rates up as much as they can to throttle the flow. If the rate makes sense to you, lock it in and move on. You’ll be glad it’s over when you’re done.