Mortgage Rate Update February 21, 2013

Quick housekeeping note: ‘Rate update’  will be on vacation on Monday so the next update will be Thursday, February 28th.

Mortgage rates are mostly unchanged this week.

In the monetary policy meeting minutes that were released yesterday afternoon it was revealed that Fed officials are split on when and how to unwind quantitative easing which they have been engaged in for much of the past few years.

On one hand, some Fed officials are concerned that ongoing easing could lead to instability in the financial markets (many experts believe low rates following 9/11 fueled the housing boom and bust).  However, the economy does not appear to be recovering in a robust manner.  Uncertainty is generally good for mortgage rates.

Interest rates are taking direction from the stock market which had its worst day of the year yesterday and is opening up soft again this morning.  Weakness in stocks is generally good for mortgage rates.

If stocks continue to decline will rates improve from current levels?  Possibly but I don’t think we have much to gain.  For now interest rates have remained steady thanks to market sentiment that stocks are overdue for a correction.  However, that sentiment is probably only temporary.  Once investors refocus their attention on the fact that the Fed will discontinue quantitative easing at some point in the future rates will march higher.

As of today we can get away with floating.  But, in the long run still believe rates will move higher in 2013.

Current Outlook: near-term floating, longer-term locking bias