Mortgage Rate Update May 8, 2014

Although mortgage note rates are unchanged from Monday the accompanying closing costs are slightly less so in fact the overall rate environment has improved modestly.

In case you haven’t heard, a new grant program is making 0% down financing available again.  You can read about that program HERE.  Feel free to email me if you have any questions.

It feels a bit like groundhog’s day in the interest rate markets.  Mortgage-backed bonds (MBS’s) have improved during 11 of the past 12 trading days.  Why are MBS prices rallying?

Uncertainty surrounding the conflict in Ukraine is driving investors towards “safe-haven” assets.  In and of itself Ukraine is not an economic driver.  However, should Russia continue it aggressive tactics and there is diplomatic fallout it could impact trade relations with Europe which could drag the global economy down.  This has the impact of lowering yields on US-denominated debt securities.

The chair of the Federal Reserve & European Central Bank (ECB) have both made comments in the past 24 hours which has also been supportive of rates.  In testimony to Congress given yesterday Janet Yellen said the economy is recovering but not at  pace where the Fed can raise short-term rates.  Mario Draghi (ECB President) stated the ECB is prepared to provide further monetary stimulus to help curb the threat of deflation.

Momentum in the marketplace is on our side but at some point this ride has to end.  I will maintain a floating position and re-evaluate on Monday.

Current Outlook: floating