Rate Update December 2, 2008
Mortgage rates remain low this morning.
In the absence of any economic data mortgage rates will likely respond to the stock market. As we’ve pointed out many times in ‘rate update’, when the stock market rallies it often pushes rates higher.
This morning stocks are sharply higher. This may push mortgage rates higher this afternoon.
In the long-run we see a couple major themes impacting mortgage rates:
*The Federal government’s program to purchase loan-backed securities is on the near horizon. The government’s deep pockets will certainly create significant demand for mortgage-backed bonds that should ultimately drive mortgage rates lower.
*However, what may work against these efforts is a stock market rally. There are a few near-term events that we believe could help stocks rally (which could push on rates to move higher).
-First, on December 16th the Fed is set to meet and make an interest rate decision. Many analysts believe the Fed will cut and work in a coordinated effort to get other central banks around the world to do the same. This would certainly be medicine for stocks to rally.
-There is increasing speculation that the Securities and Exchange Commission (SEC) will ease “mark to market” rules that have crippled bank balance sheets over the past 18 months. An announcement of this sort would surely cause financial stocks to rally.
-Lastly, should the Federal Government commit to helping the ailing auto industry stocks would certainly rally.
In summary, the near-term is increasingly difficult to predict. However, there does appear to be momentous events on the horizon that are likely to significantly impact the markets. As always, we’ll keep you posted.
Current outlook: floating- definitely a great opportunity to lock