Mortgage rates briefly worsened late last week but are back at all-time low levels at the start of this week.
QE3 continues to be a primary driver for mortgage rates. In case you’ve forgotten the Fed announced a couple weeks ago that it would be $40 billion in mortgage-backed bonds (MBS’s) per month for an open-ended period of time. At this point the Fed’s buying power is trumping other factors. How do we know?
Despite unfriendly economic & financial news mortgage rates are managing to creep lower. Over the weekend Spain released results from its latest bank stress test that showed the financial system there is not as bad off as previously thought. Good news for the European debt crisis would ordinarily be bad news for US mortgage rates.
Furthermore, US stocks are trading sharply higher this morning on optimism surrounding Europe AND a better read on the US manufacturing sector than was expected. Normally. when stocks move higher it causes mortgage rates to worsen.
For now it seems like QE3 is overshadowing other factors. I would expect this trend to continue so long as the economic picture remains uncertain AND inflationary pressure remains low.
Current Outlook: floating bias