Although mortgage note rates are unchanged today the pricing is improved from Monday so in fact conditions are better. Applicants should be able to lock today with slightly lower closing costs compared to earlier in the week.
Pricing for mortgage rates improved following the release of yesterday’s monetary policy statement from the Federal Reserve. In effect, the committee maintained the language from the March meeting in which they held silent on when they plan to hike short-term interest rates. As you’ll remember at the beginning of the year the markets had expected four .25% rate hikes during 2016. Thus far there have not been any following the December 2015 hike and the markets think the Fed will remain on hold until Q4.
In other Central Bank news the Bank of Japan also held steady on their monetary policy today. The markets had been expecting further monetary stimulus which could have helped US interest rates improve due to the fact that the US dollar would likely have strengthened against the yen.
In economic news, the Commerce Department reported that the US economy only grew by a .5% annualized rate during the 1st quarter of 2016. This is slower growth than analysts had expected. Bad news for the economy tends to be good news for mortgage rates.
Despite the slower than anticipated growth inflationary pressure appears to be picking up which is bad news for mortgage rates. The Personal Consumption Expenditure price index, the Fed’s favorite gauge for inflation, was shown to have increased by 2.1% year-over-year. This is up from 1.3% last quarter. Should inflationary pressures persist the Fed will be forced to hike short-term interest rates even if they are not confident in the economic recovery.
Although momentum is back on our side the technical outlook for further improvements does not look favorable so I will maintain a locking bias.
Current Outlook: locking bias