Mortgage Rates Steady Ahead of Fed Announcement

Mortgage rates are liable to trade in a narrow channel today with average to low volatility ahead of the tomorrow's Fed announcement.  Although this meeting is not a major policy event, is still in focus for financial market participants right now. Of course, an unexpected geopolitical event could push rate higher or lower and increase volatility.

Where Are Mortgage Rates Going?                     

>>> Rates are holding steady

The Federal Open Market Committee kicks off its two-day meeting today, and what we have seen thus far is a weaker start in both equities and bonds. The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, is holding where it started this morning at 2.96%. Mortgage rates tend to follow in the footsteps of the 10-year yield, so even though it is steady, the movement with the stock market may send some mild upward pressure today on the yield.

It is virtually guaranteed that the FOMC members will vote to keep the nation’s benchmark interest rate, the federal funds rate, unchanged from the prior meeting. It is anticipated that the next rate increase will be at the June meeting. Slight increases in inflation and a solid job market are leading to more rate increases in the Federal Funds market and in turn, will increase all short-term rates.

Although there is a minority that talks about three more rate jumps this year, the last we heard from Jerome Powell and the Fed was two increases. That makes more sense than the hysterics that imply much higher inflation, wage gains, and stronger economic growth. Unemployment is at a 17-year low of 4.1 percent, and the Trump administration’s tax cuts and fiscal stimulus are expected to further juice the economy. However, wages so far have not improved as much as had been expected.

It will be the language and tone of the statement that will drive the markets tomorrow afternoon, but until then, will be in a holding pattern till then.

Rate/Float Recommendation           

>>> Lock now before rates move higher

Mortgage rates are holding at some of the highest levels of the year, but they are poised to continue moving higher. If you are considering buying a home or refinancing your current mortgage, it is more likely right now that rates will rise than fall.  The bottom line would be if you want to avoid the risk of locking in after this happens, you should lock in your rate now.

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 TheMoney Man.