Rate Update Septmber 12, 2013

Mortgage rates are priced modestly better this morning compared to Monday.

Stock and interest rate markets are mostly trading sideways this morning as investors consider next week’s Fed announcement as well as geopolitical tension with Syria.

The Fed will conduct its regularly scheduled monetary policy next Tuesday-Wednesday and will release a statement on the 18th.  It is widely expected that the Fed will announce a tapering plan which will unwind quantitative easing (QE) measures currently in place that help keep interest rates low.  Intuitively one would think that upon the announcement mortgage rates will move higher.  However, this announcement is already priced into the rates you see today (because the markets expect this to happen).  One analyst I like is even calling for rates to improve a little after the announcement because then at least the tapering plan will be known.  It’s tough to know with any level of certainty.

Speaking of the Federal Reserve, over 300 academic economists signed a letter, which was sent to President Obama yesterday, supporting the appointment of Janet Yellen as the next Chairman.  Yellen is seen as a more interest rate friendly chairman compared to her counterpart Larry Summers.  An announcement is expected from the President in the next couple months on who will replace outgoing Chairman Ben Bernanke.

Yellen has the support of 300+ economists.
Yellen has the support of 300+ economists.

Tomorrow the markets will get the latest reading on retail sales and price changes at the wholesale level of the economy.  Should the reports come out hotter than expected it would put pressure on the Fed to unwind QE faster than thought.  However, most of the economic data out over the past week has matched expectations so we’ll have to see.

Lastly, the diplomatic conflict with Syria is currently in a holding pattern while Russia develops a plan that would likely avoid any military action.  Should the tension between the US and Syria die down it could put upward pressure on rates.

At this point I don’t see any compelling reason to lock.  I will recommend a floating position even though my long-term outlook still calls for rates to rise.

Current Outlook: floating

 

The views and opinions expressed in this site are those of the author(s) and do not necessarily reflect the official policy or position of Cherry Creek Mortgage Co., Inc. This is for informational purposes only. This is not a commitment to lend.