Mortgage rates are basically unchanged following the Fed’s big announcement yesterday.
In Monday’s ‘rate update’ I wrote,
“…analysts now believe that the Fed will announce an extension of their current monetary stimulus program called “Operation Twist” which is set to expire at the end of this month….Should the Fed announce an extension…we could see rates go a little lower…if the Fed elects not to extend “Operation Twist” or decides to extend it for a short duration I would expect mortgage rates to rise.”
In their monetary policy statement yesterday the Fed DID extend “Operation Twist” for 6 months. Initially it looked like mortgage rates would worsen on the announcement because 6 months was less than many had expected.
However, they’ve since stabilized.
Also accompanying the Fed’s statement was a downward adjustment to their economic forecast siting the European debt crisis & political stagnation in Congress as the main culprits. Bad news for the economy is good news fro mortgage rates.
Grim economic data is also helping mortgage rates to remain low this morning. A survey of European Union purchasing managers hit the lowest level since June of 2009. Furthermore, a separate survey of consumer confidence fell further in June from May making it unlikely that retail consumers will increase spending in the near-term. In China, a gauge on manufacturing activity slowed by more than expected.
In housing news the National Association of Realtors reported that existing home sales fell in May from a month earlier on lack of supply but were still almost 10% higher than a year earlier.
I expect rates to remain low for now. Attention will now shift back to Europe.
Current Outlook: neutral