Mortgage Rates Slightly Lower Today

Mortgage rates moved slightly lower today as both stock indexes and interest rate markets saw a little improvement today. Mostly this was preparing itself their positions for the FOMC tomorrow. The FOMC not likely to say much differently than in the last meeting. Markets believe the Fed will move in September, and that may not likely to change tomorrow. I, on the other hand, believe the Fed would rather not hike rates this year - the economic outlook is not yet on solid footing and Yellen has made that clear in her recent speeches and her last press conference. Since the last meeting employment has improved on the headlines but wages still low. Most economists believe wages will begin to increase as the US economy strengthens and global economies expand. Wishful thinking, but it is better to be optimistic than realistic. People by nature do not want to hear bad news. Listening to one economist this afternoon, he said an increase in September and another in December - and four more next year. You really have to be a roaring economic bull to buy into that outlook at this time.

As the Greek default moves closer there is still nothing encouraging in any of the news reports. The whole situation is fraught with unknowns.

Technicals remain bearish but less so than recently. A high risk trade for mortgage lenders - what we want to do is be long into the FOMC meeting with both fingers on the trigger when the policy statement is released. We can lock quickly if necessary but with markets expecting the worst it is worth trying as long as you are not adverse to risk. The more conservative and realistic stance into the policy statement is to remain flat. The risk is about 35BPS points, the reward possibly as much as 75BPS over the ensuing few sessions.

In summary, it has been a "watch and wait" day today, as markets prepare for tomorrow's Fed Situation Report and the follow-up press conference with Chairwoman Yellen. In my view, it would take a remarkably dour Fed view to push rates down substantially, and that's not likely. Best case scenario may be that we stay in this range until the EU/Greece conflict finally comes to a head. A lot of stored energy looking for some direction for lift off one way or the other. I am very cautious for now and feel locking is prudent. I may have a different answer in 24 hours from now, but would you be more upset if your rate goes up 1/8th percent or down 1/8th percent? That’s the question to ask yourself overnight.