Mortgage Rate Update Janaury 30, 2014

Mortgage rates are unchanged from Monday.

This morning the Commerce Department released its initial read on 4th quarter Gross Domestic Product (GDP) for 2013. The report showed that the economy grew by a 3.2% annualized clip for the quarter. For the calendar year the US economy grew at a 2.7% pace but in the 2nd half of the year the economy grew at a 3.7% pace (1.8% in first half). Overall it appears that the economy is continuing to pick up steam and good news for the economy tends to be bad news for mortgage rates.

In case you missed it, yesterday’s statement from the Fed confirmed what many of us thought.

Despite the weaker than expected jobs report for December the Fed will taper quantitative easing (QE) by an additional $10 billion per month. Furthermore, they stated they intend to continue to taper QE in the coming months and left the door open to more aggressive cuts in the future. I continue to believe that the Fed will fully wind down its QE policy by year end. Since QE is designed to push long-term interest rates lower this is not a good sign for rates.

The National Association of Realtors reported that pending home sales fell sharply in December. In the west pending home sales slipped by 9.8% likely due to a lack of inventory.

Mortgage rates are currently at the best levels in the past two months. Could they continue to improve? Yes, but I will continue to recommend a locking bias because we still believe rates will rise over the course of the year.

Current Outlook: locking