Mortgage Rate Update August 16, 2012

Mortgage rates are higher today compared to Monday.

Interest rates in the US increased sharply in the past few days as investors lost confidence that the Fed will engage in a 3rd round of quantitative easing (QE3) in September.  The yield on the US 10-year treasury has increased by approximately .50% in the past 3 weeks and mortgage rates have increased .125%-.25%.

The economic data for the US over the past week has revealed stability but is far from suggesting a robust recovery.  In Europe data released Tuesday showed a contraction in economic activity.

From a technical standpoint mortgage-backed bonds (MBS’s) appear oversold so I wouldn’t be surprised to see mortgage rates recover some of their losses in the next few days.  In the longer run, there will be A LOT of attention paid to the next all-important jobs report scheduled for September 7th.  If that report is weak we may see rates improve on anticipation of QE3.  If the report is not weak, similar to this past month, then rates may continue to drift higher.

Current Outlook: floating