Mortgage Rates Slightly Better

Mortgage rates are moving sideways to slightly better this morning, as yesterday reports turned out to be not that crucial and the Fed announcement did not have any surprises.  Weekly Jobless Claims came in lower than expected, which has not been a report that has carried much weight in recent years but reports like this can be bad for rates as it can lead to an upward pressure on wages.

Where Are Mortgage Rates Going?                     

>>> Rates are slightly better, but still trading in a narrow range

The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, opened up this morning at 2.94% which has helped moved rates a little lower thus far in trading. Yesterday the FOMC made it clear interest rates would move higher but added the word “gradual” defining the timing. Consensus in markets this morning is at the June meeting the Fed rate will be increased by 0.25%. 

The phrasing in the policy statement was not as aggressive as expected, the reference about the economy and economic growth was rather subdued compared to what investors and big money managers believe. The statement; “Risks to the economic outlook appear roughly balanced” … “The stance of monetary policy remains accommodative”.  The made referenced to inflation that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” Overall, we believe that the Fed is watching but also patient.

Another factor that has added some support to the rates is the soft inflation in the EU, as they reported that the economy is slowing, and consumers are slowing spending.  

With the 10-year Treasury at 2.94%, will it hit the next resistant level of 2.90%?  We do not feel that this will happen given the better economy, the wide belief inflation is increasing, and the movement this morning driven by FOMC remarks that rate increases will be gradual and so far, inflation has not risen much. Then the decline in EU inflation and consumer price also adding a modicum of support to US rates. Keep tomorrow’s April employment data in mine, traders certainly will.

Rate/Float Recommendation           

>>> Dangerous to float, best to lock as rates can increase in a hurry

Mortgage rates typically move in the same direction as the 10-year yield and, as such, are coming close to a strong resistant level which we feel will not be crossed.  The old cliché to buy low and sell high, is now best suited to let you know that this is probably the best time to lock while rates are lower than they have been recently.

Despite what happens in the near-term, mortgage rates are still expected to move higher in the long run so locking in a rate sooner rather than later remains the smart decision for most borrowers. If you have any further questions, give us a call or visit our website at Call The MoneyMan.