Mortgage Rate Update August 30, 2012

Mortgage rates are unchanged from the beginning of the week.

Speculation regarding the Fed’s next monetary policy move is the primary factor driving interest rates.  Fed Chairman Ben Bernanke is scheduled to speak tomorrow in Jackson Hole, Wyoming at a conference of central bankers from around the world.  He is widely expected to signal whether or not the Fed plans to engage in a third round of quantitative easing (QE3).


Minutes from the last open market committee meeting, which took place about a month ago, indicated that QE3 was likely to be announced in September.  However, since then US economic data has been relatively healthy.  In fact, the Commerce Department reported today that personal spending increased by the most in July compared to the previous 5 months.

However, the European debt crisis remains a threat to global growth.  A survey of European business & consumer confidence released today showed that it had fallen to the lowest level in over 3 years in August.  The Fed may want to ease in order to prevent fall out from Europe.  It’s worth noting that the Fed’s favorite gauge of inflation is currently reading below 2.0% which gives them room to act.

Currently, it is my belief that QE3 is partially priced into the current level of interest rates.  Therefore, if Bernanke does not signal QE3 consumers have more to lose than to gain.  I will recommend a locking bias headed into tomorrow.

Current Outlook: locking