So what’s happening in the markets? It’s essentially a battle of two “frames of mind.”
On the one hand, we have the belief (hope?) that the worst is over and the markets and the economy are starting the long arduous road to recovery. This belief is evidenced by the headline numbers from Wells Fargo, GE, Citibank and Fed Chairman Bernanke’s statement that the rate of decline is slowing. As that belief continues to grow, it’s putting upward pressure on mortgage rates.
On the other hand, we have the fear that the worst isn’t over and this is, shall we say, a “dead cat bounce.” What’s a dead cat bounce? It’s a false bounce in the markets that makes it appear that a recovery is happening but it soon reverts to the downward trend from before. This belief/frame of mind is evidenced by the “rest of the story” about Wells earnings, the signs that foreclosures are picking up, the all time high number of unemployment claims, the continuing pressure on Citibank’s credit card portfolio, negative housing starts numbers and a poor Philly Fed Index.
So which way is the economy going? Are we starting the journey back or is this a temporary blip? I’d love to believe that this is the start of the journey back and I sincerely hope I’m wrong but I’m afraid it’s not.
What difference does that make? Frankly, it’s a tug of war (or a game of teeter totter)
between these two frames of mind. As we see more evidence of a turnaround, we’re going to see more upward pressure on mortgage rates. As we see more evidence of a downturn/ongoing problems in the economy/markets, we’ll see downward pressure on mortgage rates.
This might seem a bit contradictory but while I believe that we haven’t seen the bottom in the markets and the economy, I believe that the upward pressure is going to win out and we’re going to see rates drifting higher rather than dropping lower.
What are rates at today? We’re at
5.0% for 30 year refi with 0 pts.
4.75% for a 30 year purchase with 0 pts
(both are for loans of $417,000 or less with credit scores over 720)
;)
;)
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