Mortgage Rate Update February 19, 2013

Posted on by Evan in Rate Update

Mortgage rates are unchanged starting the week.  In case you missed us yesterday the bond market was closed for President’s Day.

A game of tug-of-war is keeping rates steady to start the week.
A game of tug-of-war is keeping rates steady to start the week.

The tug-of-war between investors who believe interest rates will rise and those who think they will remain low continues.  After increasing near the beginning of the year the competition has been pretty even with rates remaining within a tight range over the previous couple weeks.  So what’s next?

The folks who believe that rates will rise point out that the debt crisis in Europe has mostly died down and that the Fed will discontinue quantitative easing (QE)in the future.  Stocks are trading higher in Europe today on better than expected investor sentiment in Germany.  We may learn more tomorrow about the Fed’s position on QE when the minutes from their last monetary policy meeting are released.  The release of their meeting minutes in December is largely credited with causing mortgage rates to rise .25-.375% off all-time lows.

Investors who believe rates will remain low point out that the US economy is vulnerable due to the expiration of some tax cuts and the looming spending sequester due to take effect on March 1st.  In fact, Wal-Mart reported the worst monthly results in seven years yesterday blaming the expiration of the payroll tax cut and delayed processing of tax refunds.

Lawmakers remain far apart on a deficit reduction package which is needed to avert approximately $85 billion in federal government spending cuts.  If the sequester takes effect without any expectation of a deal then we would expect mortgage rates to benefit in the near-term.

I think rates could worsen before possibly improving when/ if the stock market corrects.  I recommend locking today or tomorrow.

Current Outlook: locking