Mortgage Rates Slightly Higher Today

Mortgage rates were slightly higher today, continuing a move from yesterday that saw most of the early gains evaporate by the end of the day. Today's market activity was much more subdued by comparison, making it tough to say if we're seeing some sort of reversal of the recent drop in rates or simply a pause. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains at 4.125%.

Even after today's move higher, rates remain very close to their lowest levels since July 2013. This week’s economic data was not good.  April retail sales were flat after a strong March as consumers continue their caution in spending.  Weekly claims looked good, declining 24K to 297K the lowest filings in 7 yrs. The job market is not strong, most jobs being created are either part time or low paying service sector jobs. Up until now financial media has ignored the weakness but now it cannot be swept under the rug any longer. Five years after the financial crisis ended, soft growth in Europe, a stop-and-start U.S. recovery and waning momentum in China have policy makers groping for what to do next.

One big surprise this week was when Mel Watt, the new head of FHA, is intent on lowering standards for mortgage credit and is commenting that Fannie and Freddie should not be flushed down the tube at the moment.  Good news, but will lower standards re-start first time home buyers? This is a different time - young people gagging on huge tuition debt and not forming new households are not likely to reverse the new trend. More government is bad government, in this case though Barney Frank and his ilk had ignorantly shut down mortgage lending with the draconian Dodd/Frank bill.

Next week there is not much data - April existing and new home sales are headliners on Thursday and Friday next week.  Most economist are still bullish on their outlook for interest rates as the path to lower rates is likely to be choppy - but the 10yr is very likely to drop to 2.25% before the bottom is hit. While rates are declining there are those stubborn traders and pundits that remain bearish.  I agree but in the meantime that with that advice, if acted on, has been a mistake. To believe interest rates will increase over 3.00% on the 10yr note this year one has to believe the US and global economies are on the verge of solid increased growth.

In summary, what a week for home loan rates which moved down almost every day this week with today is an exception. Next week brings a new offering a Treasury auctions. I see the recent momentum in the Treasury market continuing and bringing down rates with it. If you have a long time horizon 30 days or more floating may bring you lower rates. If you are closing in the coming weeks you should exercise some caution and lock for rates as the roller coaster can be hard on the stomach.  Is the risk that much more favorable than the reward?  Again, my favorite saying before I close out the week, Pigs Get Fat and Hogs Get Slaughtered!