Mortgage Rate Update July 28, 2016

Mortgage note rates are unchanged from the beginning of the week but closing costs are moderately lower so in fact conditions have improved.

The primary economic highlight for this week took place yesterday when the Fed released its post-monetary policy meeting statement.  As expected they left short-term interest rates unchanged (as a reminder the Fed does not directly control mortgage rates).  The tone of their statement has led the markets to believe that the Fed may hike short-term interest rates again as soon as September.  I happen to believe that December will be the absolute soonest and I won’t be surprised if they don’t hike at all until 2017.

Over the long run we’d expect mortgage rates to move higher should the Fed hike short-term rates.  However, in the short run mortgage rates could actually improve on news of a rate hike.  Since rate hikes are used to curb inflationary pressure and inflation is the nemesis of mortgage rates this may not be so bad.

Tomorrow Q2 gross domestic product figures will be released.  A strong number would likely be bad news for mortgage rates and vice versa.

I am going to maintain a floating bias.

Current Outlook: carefully floating