Mortgage Rates Steady Despite Massive Volatility

Mortgage rates surprisingly did not move as much as one would expect with all the massive volatility that is happening all around the world. The most prevalently quoted conforming 30yr fixed rates for top tier borrowers remained at 3.75% with no fees, but 3.625% was mix with the fees quoted.

Total attention today was on the stimulus package announced this morning by the European Central Bank. A stimulus (QE) was widely anticipated based on a number of comments from Mario Draghi over the last two weeks, what was a surprise was the amount.

The reaction to the ECB”s announcement generated huge volatility in the interest rate markets this morning, also in stocks but the bond market saw the most confusion. The 10yr note, bellwether for mortgage markets, shot up to 1.95%  with MBS following the same curve. This afternoon rate markets did settle down but I do not believe the reaction to the ECB is over. This afternoon the stock market lit up with the DJIA up 270 points. The euro currency had been falling for the last two month today it dropped about 3%. Money flowing into the US from foreign investors is likely to increase, aiding US interest rates and the equity market. The US is benefiting from troubles in China and Europe.

The stimulus in the EU will not work. It has not worked in the US with trillions of support from Treasury and the Fed, it did not work for Japan and it is not going to work in China. Today every major economic name was on the wires. According to most of them this is a good thing and optimism ran up. Boloney! The stimulus is not about jobs, buying debt from Spain with a 25% unemployment rate will not stimulate the country to solve its debt issues and improve the economy. I can say that for most of the southern Europe countries. Europe is headed for the same outcome as Japan – as they have been deflating for 15 years and still cannot right the ship with recent stimuli from the BOJ.

Confused? If you are you are not alone, the entire US and global markets are also confused, a definition for volatility. Central banks are close to the end of their ropes, the Fed has no more bullets that could be employed to pull inflation to its 2.0% goal, the ECB is going to find out they cannot get it done with Fed like QEs. The world is not the same now as it was since WW II. 

In summary, who knows how this will play out over the next couple of years? The best advice I can muster is, do not get caught up with the details. For all of the chatter from heavy weight economists, politicians and myself - no one has played in this game, it is a new one with rules still being developed. Best that can be said - it is what it is, and we have to work within the framework that exists. The world is deflating—period. How that will mesh over time no one knows even if they or us believe they do. That sums why markets this year are going to be volatile, much like we have experienced already in 2015.

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.