Mortgage Rate Update September 16, 2011

Posted on by Evan in Rate Update

Despite the fact that note rates are unchanged this morning the associated closing costs are slightly higher making pricing worse.

SENTIMENT OVER THE EU CONTINUES TO DRIVE RATES

Europe continues to be the primary driver of mortgage rates.  When the outlook over the stability of the European debt crisis is grim it encourages investors to seek “safety” in the US which drives our yields lower.  Conversely, when investors are more optimistic about the situation it causes rates here in the US to rise.

Following the announcement yesterday that central banks from the around the world would cooperate to help curb contagion in Europe the mood has been optimistic and therefore mortgage rates have risen but still remain very close to all-time lows.

I fully expect that sentiment over the European debt crisis will continue to be the primary focus for the interest rate markets at least until Wednesday which is when the Fed is scheduled to deliver their latest monetary policy statement.  As the US economic recovery weakens many analysts believe they will announce some sort of quantitative easing with the goal of reducing interest rates even further.  It remains to be seen if this will take place and what sort of effectiveness it would have.

Current Outlook:  neutral