Last week mortgage markets closed unchanged (meaning no increase or decrease in rates), but that’s not to say mortgage rates were calm. Monday through Wednesday, rates improved steadily before a swift, late-week sell-off flushed all the gains down the toilet.
Mortgage rates have been very low for a very long time, against the expectations of most market experts, and consumer’s “comfort level” with these rates are at an all time high.
Ask Uncle Jimmy what he paid on his mortgage back in ‘85 – I bet it’s not in the single digits.
The quick reversal that took place on Thursday-Friday is signaling that the markets are preparing for change.
One key story from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”.
Kansas Fed President Thomas Hoenig was the lone dissenting vote. (Boo to you Tommy Boy)
For rate shoppers in Texas , take note.
The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010 (ya, this is in 9 days). This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009 and it’s expected that the markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.
This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:
- The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
- The New Home Sales data for February is released Wednesday
- Consumer Confidence data hits Friday
Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.
But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.
His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon. Either way, have an itchy trigger finger this week if you’re looking to enter into a sales contract or are looking to refinance.
Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now – especially with momentum shifting for the worse.
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