Mortgage Rates Market Update by RJ Baxter First Mortgage Corp Evergreen, Colorado

Mortgage Rates Market Update by RJ Baxter First Mortgage Corp Evergreen, Colorado

Mortgage Rates improved last week due to several key factors.  Note the bond chart below and Friday's close at the highest level we have seen for over a month, above the 200-day moving average, an important level of resistance currently.

One of the biggest factors for Mortgage Rates last week was the FOMC meeting and policy statement on Tuesday and Wednesday.  The world watched as the Fed kept their verbiage essentially the same and stated that rates would remain unchanged "for an extended period" and that inflation remains subdued.  These announcements were good for rates as inflation is the enemy of Mortgage Rates, driving rates up, so the Fed stating that inflation is not a concern caused a rally mid-week.

However, inflation will come eventually with all of the government stimulus money being poured into the economy, and as soon as the Fed changes the verbiage and starts raising their benchmark rate, it will lead to higher Mortgage Rates as well.  Even though the Fed does not control Mortgage Rates, their policies have an influence on the direction of the market. 

Despite the Fed meeting, the headlines were taken by Greece and the crisis befalling that country.  Greek debt was reduced to junk status signaling that an all-out collapse of the Greek economy may be imminent.  And Greece isn't the only country in trouble.  Portugal's debt was also downgraded and other countries may follow. 

Why is this important?  This is a warning sign that a government policy of taking on massive amounts of debt is not a good one, and the US needs to take heed.  Large economies like the US are not immune to potential downgrades of government debt, which would lead to disastrous consequences.

Last week also brought some positive data, with consumer confidence up to the highest level since September 2008, and GDP coming in positive for the third straight quarter, although below expectations.  Remember, in general positive economic data leads to higher Mortgage Rates, and negative news leads to lower rates, but the Fed statement and the Greece crisis had a larger impact on Mortgage Rates than the positive data that was released.

This week will be interesting with the release today of the Personal Consumption Expenditure Index (PCE) which is the Fed's favorite gage of inflation.  You know the Fed will be watching this report closely.  The end of the week brings the release of the all-important April jobs report.  Employment almost always has an influence on Mortgage Rates, and stronger employment figures could lead to Mortgage Rates jumping back up to the higher levels of a few weeks ago as this would be yet another sign that the economy is back on track.

As always, I will be watching the market closely for you and will advise you as to the best time to lock your rate.

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