Rate Update September 21, 2010

Note rates on are unchanged this morning but pricing is slightly better.

The Commerce Department reported earlier that housing starts surged in August.  Analysts had been expecting a small decrease in housing starts from July to August and in fact they rose by 10.5%.  Much of the gain is being credited to multi-family construction.  Typically better-than-expected economic data is good for stocks and bad for rates but the markets are not reacting thus far.

The markets are awaiting the Fed’s policy statement which is due out in a couple hours.  The Fed is widely expected to leave short-term rates unchanged but the debate on Wall Street is whether they were announce further quantitative easing at this meeting to help keep long-term rates low.  Most market participants believe they will not announce a specific plan but open the door for action in November.  If they do announce a plan to buy more US Treasury bonds I would expect mortgage rates to benefit.

I am going to maintain a locking bias since pricing is modestly better today.

Current outlook: locking bias