Mortgage Rate Update February 13, 2017

Mortgage rates worsened during the latter half of last week.

Mortgage rates will be looking for love tomorrow from Fed Chairwoman Janet Yellen.  She is scheduled to provide testimony to congressional lawmakers tomorrow and Wednesday.  Much like the origins of St. Valentine’s Day are not well understood neither is the relationship between the Fed and mortgage rates.

Mortgage rates are looking for some love from the Fed this week.

I am particularly interested to hear if Yellen will comment on when they might discontinue the practice of reinvesting principal repayments back into the mortgage-backed bond (MBS) market.

You might remember the term “quantitative easing” (“QE”) which was thrown around exhaustively from 2009-2012.  During this time the Federal Reserve essentially printed money and purchased, amongst other things, mortgage-backed bonds with the intent of driving interest rates lower.  Although the Fed is no longer actively engaging in “QE” they are using the principal repayments from refinances and home sales to repurchase/ replace MBS holdings which in effect helps to keep rates down.  If and when they discontinue this practice we could expect mortgage rates to worsen.

Looking at the rest of the economic calendar for the week we’ll get some fresh inflation data Tuesday and Wednesday, retail sales on Wednesday, and new housing starts on Thursday.

Unfortunately momentum is working against us so I will maintain a locking bias.

Current Outlook: locking