Mortgage Rates Jumped After FOMC Announcement

Mortgage rates took off, then retreated, then jumped again after the FOMC announcement.  It looked like every word was changing the trades as they were spoken, until afterwards when it was digested and over analyzed. The most prevalently quoted conforming 30yr fixed rates for top tier borrowers was still at 3.875%, but 3.75% added a few more fees than yesterday.

The FOMC policy statement was yet another statement that lets markets try to figure out.  The initial reaction sent rates lower and then higher, until the market finally settled down.  The key to this meeting was believed that the FOMC would change the language “for a considerable period” when forecasting when the Fed would begin to increase rates – the phrase was left in but in a little different context.

In her press conference after the FOMC meeting Janet Yellen said that the change in the language in the statement was not a change in policy as it has been for the past few meetings. She did say that the FF rate would not be changed in at least the next two FOMC meetings (meetings are generally six weeks apart). On inflation, she thinks the declining oil and commodity prices is transitory - you have to wonder what she is thinking, crude prices cut in half in 4 months isn’t transitory in my wheel house. Yellen said she believes the drop in crude and energy prices is a net positive for the economy. There is a new phrase out there now; Yellen coined ‘lift off’ defining when the Fed will begin increasing rates.  Ten members on the FOMC, 30% voted against the statement and the Fed’s outlook - it is rare that that many FOMC members descent.

Yesterday and Monday I noted the bond and MBS markets were showing signs of being a little too extended in their movement within the short period of time. The muddled and in a sense embarrassing statement this afternoon does not sit well for me, nevertheless it is what it is - a real jumble of comments. There is always confusion when the Fed talks, this time it may set up some consolidation in the bond and mortgage markets. I will hold the bullish outlook for interest rates until the 10yr closes above 2.20%, but let the markets settle before I dis-continue to hold onto rate locks in the short run.

In summary, rates have been trending to new lows until today.  Global economic headlines and oil prices have certainly helped and more than likely will continue.  It is hard not to lock at these rates, as the volatility can be more harmful than good – but floating can be rewarding just the same.  I guess my old sentiment that Pigs Get Fat and Hogs Get Slaughtered might be more of a reality than just an ol’ wise man saying.  

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.