Mortgage Rate Update June 18, 2012

Mortgage rates are priced slightly better this morning compared to last week.

Yesterday’s elections in Greece resulted in a slim victory for the party which seeks to implement the terms of the bailout plan and remain in the European Union.
There are still plenty of questions facing Greece and the rest of the EU so although the election offers closure on this chapter plenty of uncertainty remains which is good for US mortgage rates.

WILL THE FED TWIST AGAIN?

The Federal Reserve Open Market Committee is set to meet for their regularly scheduled monetary policy meeting tomorrow-Wednesday.  Many analysts now believe that the Fed will announce an extension of their current monetary stimulus program called “Operation Twist” which is set to expire at the end of this month.  The program is designed to help keep long-term interest rates low and stimulate growth.

Should the Fed announce an extension, as many now expect, we could see rates go a little lower though some of this is already priced into the market.  More critically, if the Fed elects not to extend “Operation Twist” or decides to extend it for a short duration I would expect mortgage rates to rise.

The economic calendar will provide updates on the housing market at  a time where anecdotal evidence suggests things are picking up.  I expect rates to remain clam until the Fed announcement on Wednesday.

Current Outlook: neutral