Mortgage rates are based on mortgage backed securities (bonds) and often change throughout the day. Since they are based on bonds, mortgage rates will often improve when the stock markets are deteriorating as investors will trade the safety of bonds for the potential greater return found with stocks. The reverse is also true. World events as well as scheduled economic indicators may impact the direction of mortgage interest rates. Watch for signs of inflation, which erodes the value of bonds and therefore, causes mortgage rates to trend higher.
Happy Cinco de Mayo! This week’s calendar is very light, especially when you compare it to the amount of economic data that was released last week. It’s not just economic reports that may move mortgage rates. The stock markets or world events, such as what’s going on with Russia, may impact the direction of mortgage rates. Here are the economic indicators scheduled to be released this week:
Happy Holidays! With this being a short week due to Christmas, we may see a bit more volatility with mortgage rates with many traders taking time off for the holidays. Markets will be closing early on Tuesday for Christmas Eve and will be closed all day Wednesday. Here are some of the economic indicators scheduled to be released this week:
UPDATE: DECEMBER 23, 2013: Incoming Director of the FHFA, Mel Watts has announced that he will delay the increase to conforming price adjustments (aka LLPA or guarantee fees).
This week Fannie Mae revealed conforming price adjustments (LLPA) which will increase the cost for mortgage rates in 2014. This complied with the Fed beginning to pull back on their bond buying program will certainly cause mortgage rates to trend higher.
Mortgage rates continue to be at very low levels. Although they’re not at the lows from May, Freddie Mac’s Mortgage Market Survey reports that mortgage rates have been trending lower for the last four months. If you missed the refi-boat a few months ago, this may be your second chance. You may want to contact a local licensed mortgage professional for an updated mortgage rate quote (if your home is located anywhere in Washington state, I’m happy to help you).
This week is packed with data that may drive mortgage rates higher or lower, including the Fed meeting which wraps up on Wednesday. It’s highly unlikely the Fed will make any changes to the Fed Funds Rate. Traders will be waiting for clues on when tapering may begin (it’s estimated will be pushed out to March 2014). Remember, mortgage interest rates are based on bonds (mortgage backed securities – MBS) and change throughout the day, just like stocks do. It’s not unusual to have bonds react opposite of the stock market as investors will often trade the safety of bonds for the potential return found with stocks (and the reverse is true).
The debt ceiling is influencing the markets today with the potential threat of the government shutting down at midnight tonight. Did you know that Congress is exempt from furloughs and will still be paid if the government shuts down?