Mortgage Rate Update March 23, 2011

Mortgage rates are priced slightly better this morning.

New concerns over the safety of tap water in Japan are helping mortgage rates this morning.  Japanese officials announced overnight that tap water in Tokyo has higher than allowed levels of radioactive iodine.  On this news investors are taking a cautious outlook which is pushing stocks lower & helping to push yields lower.

Also damaging investors’ outlook was the Commerce Department’s new homes sale report.  This morning’s figures showed that new home sales in February fell by much more than expected to the lowest level in 7 years.  Housing continues to be an anchor for the overall economy but the hope is that as job creation picks up, so will home sales.

New violence in the Middle East is also helping mortgage rates this morning.  As I pointed out in yesterday’s ‘rate update’ the longer-term outlook has not changed.  PIMCO’s Saumil Parikh pointed out in a recent report, “Japan’s economic growth rate will likely fall in the immediate aftermath of the natural disasters, but reconstruction activities should have a stimulative impact on growth over time.”

Therefore, I maintain a long-term locking bias.

Current outlook: long-term locking bias