Mortgage Rates Headed in the Right Direction

Mortgage rates headed in the right direction, before giving back some of those gains last this afternoon.  The most prevalently quoted conforming 30yr fixed rates for top tier borrowers was still at 4.00% with no fees, but 3.875% with extra fees did seem to attract again those folks who wanted that number. 

2015 will begin with very low rates, a stock market on fire with forecasts into the stratosphere, crude oil dropping like a stone, commodities falling, deflation increasing in Europe, the Fed unable to increase the US inflation rate for the last three years, the housing market stumbling along, job growth good but mostly low paying and; what isn’t getting much outward attention yet, the growing instability in the Mid-East. With that as a background it looks scary, however all of those conditions are only scary if investors actually get worried, and we have seen it takes a village to shake equity markets and bring those factors to the front burner. Simon’s last stanza sums it all up; the same as we face every year at this time. Remember, in January there was almost 100% agreement that 2014 would see interest rates rise, not decline 80 basis points in yield.

The S&P 500 has gained 13 percent this year, while the Dow is up 8.5 percent in 2014 after climbing above 18,000 for the first time last week. The Russell 2000 of small-cap stocks climbed to an all-time high on Dec. 26. The Nasdaq Composite Index reached its highest since March 2000 that same day, closing about 5 percent below its record. Good for equity markets but it does not beat the interest rate markets returns on treasuries.

Next week we will be treated to all of the 2015 forecasts - history clearly demonstrates most of the annual forecasts are no better than blind-folded dart contests. We used to issue an annual forecast but quit when we usually stubbed our toes - lots of guesses but in these circumstances of the “new normal” long term forecasts are a waste of effort. What economist called for $50.00 oil at this time last year? The start of the year will focus on the Fed and when rates will be increased and how long before the stock market actually has a 10% correction, there wasn’t one in 2014. Republicans will have complete control in both the House and Senate, but Republicans can’t find key common ground on most key issues among themselves. Crude oil prices will dominate commodities and will carry influence in equities and rate markets. Two things we do feel comfortable with now, Q1 2015 will be marked with very high levels of market volatility, and interest rates will not increase as much as most will forecast in the next two weeks.

In summary, as we head into the last business day of the year, we find ourselves looking at rates getting into the three’s again on the very best scenarios. With 2015 right around the corner and the Fed likely moving towards a policy rate increase by mid-year at some point markets may being to reflect this reality.  Of course, wild cards abound and rates can stay lower longer but I think the risk for higher rates has gone up. 

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 my website at www.CallTheMoneyMan.com. I have access to real time Wall Street data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.