Mortgage Rates Start 2015 With A Boom

Mortgage rates started 2015 with a BOOM – meaning it was positive as it seems like the bank were holding back a little bit during the holidays.  The most prevalently quoted conforming 30yr fixed rates for top tier borrowers was still at 4.00% with no fees, but 3.875% and even 3.75% came back a bit, albeit with extra fees, but rates are what some people want even though it may not make much sense to realize your money back.   

The first trading day of 2015 has been good for the MBS and treasury markets as increasingly more money is flowing into long dated US treasuries helping drive MBS prices lower – and although it is going to be much more volatile in these markets this year, and contrary to the consensus view - US interest rates are not likely to increase much this year. We talk about the global economic struggles a lot, what we have not pressed is that US equity markets are headed for a huge decline in Q1 or at the latest the early part of Q2. I will not  re-hash what most of you have already heard from me is the concern that the global economies are going to weaken further this year, and we will have plenty of it as the year gets under way.

For most of 2014 domestic, and particularly global investors, have funneled billions in the stock market. It and US treasuries have been a windfall in 2014 - with no place to go but the US the treasury market returned 28% in 2014 and stocks about 20%. This year will not be that generous however we expect an increase in the fear factor that will sustain US rates even with the Fed expected to increase rates. And on that account, even with almost 100% agreement that the Fed will increase rates this year, if global economies continue to falter the Fed is not committed to increase rates. Data dependent is how the Fed will be thinking, and at the moment the data is not as positive as the bullish bias believes.

2015 will be one of increasing deflation. No wide increases in wages. The job market will struggle along with low pay jobs and not much improvement in the 62% labor participation rate. The housing sector will continue weak on a comparative basis. The EU will fall back into recession. China’s economy will continue to grow at current levels, half the growth from its heyday. **I am the Lone Ranger with that outlook.

Two 2014 reports this morning, December ISM manufacturing index was less than expected. Not a serious miss, but added to the weaker regional Chicago purchasing managers index released Wednesday.  November construction spending was also soft.

In summary, the first day of 2015 has been kind to mortgage rates as we continue to incrementally improve on the best pricing we've seen in over a year and a half. Is this a sign of things to come in the 1st quarter of the year? Perhaps, but if I haven't locked my rate yet and my closing is coming in the next few weeks I would be inclined to protect what's in front of me now and lock. If my closing is much further out, floating may be safe but be wary of the market and the many landmines that have a tendency to surprise us from time to time and stay tuned in.

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.