Mortgage Rates Hit Hard Today

Mortgage rates started off flat today, but got hit hard by midafternoon, erasing most of the improvement seen since late last week.  At the time, everything was geared towards what was happening overseas as the Markets prior to the weekend were worried that the Crimean vote might lead to military action from Russia.  It did not happen so today it was back to domestic concerns.  With all said and done, the most prevalently quoted conforming 30yr Fixed for the best-qualified borrowers did inch up to 4.5%, even though at least as many are still offering 4.375%.

Unless there is an escalation from Russia, the US and Europe are not a good place in terms of the sanctions so far imposed. The rest of this week will focus on Wednesday’s FOMC policy statement and Yellen’s first press conference on Wednesday afternoon.  The Fed is very likely to taper another $10B from the monthly purchases of Mortgage Backed Securities (MBS) and treasuries, taking the remaining total to $55B.   The outlook remains that the Fed will finally end the tapering this fall, drawing down $10B each FOMC meeting.

The doom and gloomers were out there throughout the day pontificating on what Russia may do.  One pundit talking that Putin may lose control over Russian military and the army may attack the Ukraine. We believe that is more fear mongering now and should not be taken seriously, Putin is, and will be, in control of the military and whatever he wants to do about Ukraine. Obviously it is one of those moving targets, but at this time there is no real strong reason for Putin to take the world to the brink, and he as well as Obama and Europe’s leaders know it. And based on the way markets have acted over the last two weeks, investors don’t expect it either.

The bond and mortgage markets remain in their respective trading channels.  Each time since the end of Jan when the bellwether 10 yr that sets the direction for MBS prices has fallen below 2.70% as it did last week, it only stays under 2.70% for just a couple of days before bouncing back into its primary range.

In summary, rates were up today despite continuing drama in Crimea. Unless the international community escalates their response, or widespread riots break out, we are back to the basics.   Economic data and Fed policy hold the key to long term interest rate movements.  As we leave winter weather behind, and Fed continues tapering, it's most likely rates will increase, not decrease.

Keep a strong look at the markets and continue to cautiously float if you do want to take a risk.  Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com.  I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.