Mortgage Rate Update September 28, 2011

After three days of worsening mortgage rates are unchanged so far this morning.

Developments in Europe continue to drive the interest rate markets.  As I’ve been pointing out for the past week, should European leaders deliver a credible bailout plan mortgage rates would lose the “flight-to-safety” premium that helped push mortgage rates down to all-time lows.

For Europe to deliver a plan all 17 EU countries must agree to participate AND Greece must meet certain targets.  Earlier today Finland’s Parliament approved changes to the bailout fund.  Last week Finland had demanded more collateral from Greece so today’s vote is seen as a win for Greece.  Tomorrow Germany’s Parliament will vote.  Should they approve the measure it could put upward pressure on rates.

However, even if all 17 EU nations agree to the bailout plan Greece would still need to meet certain measures of deficit reduction and it is still unlikely they will be able to achieve this.

Here at home durable goods orders were reported slightly lower than expectations today and the US Treasury is set to auction $35 billion in 5-year notes.  Over the past week the yield on the benchmark 10-year Treasury note has inched up back near 2.00%.  Should it trade above this level this would also be an indicator that rates would rise.

Current Outlook:  locking bias