Mortgage Rate Update March 17, 2016

Good news!  Mortgage rates have improved this week.  I switched my outlook to ‘floating’ on Monday and for those who followed that guidance they are being rewarded with rates that are .125% better.

The catalyst for the shift in direction for interest rates was yesterday’s Federal Reserve monetary policy statement.  The markets were anticipating the Fed to sound upbeat on the labor market and more cautious regarding inflation.  However, in their statement the Fed did not acknowledge either of those factors and instead focused on the economic risks posed by international weakness.

The markets are now pricing the highest probability for the Fed to hike short-term rates only one more time in 2016.  If you’ll remember back the Fed had implied they may hike four times this year.  The Fed does not directly control mortgage rates but their view on the US economy carries a lot of weight and bad news for the economy tends to be good news for mortgage rates.

Hoping a little St. Paddy's Day luck will bring lower rates next week.
Hoping a little St. Paddy’s Day luck will bring lower rates next week.

The economic calendar has basically run its course so today and tomorrow I expect mortgage rates to react to technical trading patterns.  I rarely recommend getting greedy but given today is St. Patrick’s day I’m going to maintain a floating bias.  If rates can push below current technical support levels we could see them improve by another .125%.

Current Outlook: cautiously floating