Mortgage Rates Forecast - Post Shutdown

By
Mortgage and Lending with CMG Financial NMLS Lic. No. 194146

Now that a temporary solution reopening the government has been approved, mortgage rates appear to be headed for slightly lower levels at least through the end of 2013.  The opposing forces are as follows:

Rates will not drop to the levels seen in April of this year simply because the economies in the US and Europe are moderately improved.  As an example, Italian bond prices have stabilized and US housing prices are improving.  Additionally, the Federal Open Market Committee is not supporting Treasury bond prices at the same levels seen in April.  These fundamentals will likely prevent large bond price increases, at least for the next 60 to 90 days.

Supportive of lower rates is the hope that by “kicking the budgetary can down the road” once again, time has been purchased to reach an equitable solution to the economic impasse.  It is our belief that bond traders continue to mistrust politicians but at least the temporary time out will allow them to trade their positions with more confidence.  In the past 2 days (since the resolution was passed) bond traders have shown willingness to trade above the narrow range seen during the shutdown.  This suggests that bond prices will remain higher until another major economic event occurs.

Finally, now that the government is working again, the publishing of economic indicators such as the non-farm payroll report can be resumed.  Traders are confident that when these reports are issued next week they will reflect negative values.  This will negatively impact stock market prices and strengthen bond prices.

When the smoke clears we think that mortgage rates will improve very slightly through the end of the year.  They will not test the all-time lows seen in April however.  We believe that intra-day bond price volatility will moderate as well.  Mortgage seekers are being given more time to ponder their decisions.  In other words, it’s ok to shop but be certain to lock in your rate by the end of December.

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I am a Branch Manager with CORE Lending in Houston, Texas.  I am also Founder of Blue Ribbon Agent, a free marketing platform designed to assist agents in marketing their real estate practice.

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Mike Lesmeister, Branch Manager at AmeriPro Funding Home Loan Specialists TeamClick here to download our FREE Texas Mortgage App! Like Blue Ribbon Agent on Facebook

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