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Bart Castelli

Mortgage Rates Steady - Will They Go Lower?

Wednesday, April 9, 2014 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 - Message

Mortgage rates started the day in worse shape than yesterday's close, but came back in line before it ended keeping it the same as what it closed at yesterday following the Bond auction and the release of the FOMC Minutes. Rates had risen after that March 19th announcement and today's Minutes release provided an opportunity for the Fed to further explain some of the factors that may have concerned markets back in March. The key point in the minutes was that the Fed admitted it may have mis-led markets with comments that were interpreted by investors and traders that the Fed was preparing to increase interest rates much sooner than had been thought. U.S. stocks rose while Treasuries pared declines and the dollar sank after Federal Reserve meeting minutes eased concern about the timing of future interest rate hikes. In general, "Fed accommodation" has been beneficial for interest rates. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains 4.5%, with 4.375% getting some play on some higher price loans.

The Fed appears to be increasing its market support with comments that investors need to hear - although the Fed will continue the tapering, the Fed's primary goal is to keep the stock market from declining (forget about inflation and low unemployment the Fed's statutory goals), believing that a better stock market will right all the economic weakness that clearly underlies this economy. That being said, it will prove to be a serious mistake in a few years when inflation increases rapidly.

There is fear that the US Stock market will see a major decline sometime in the next two months - but the timing is difficult to anticipate because the Fed seems determined not to let that happen. The DJIA is likely to re-test its high at 16,600, now only about 170 points away. We are somewhat lone rangers in that view but there is a limit to how long investors can ignore that the US and global economies are not gaining momentum. If several of the economist I review are correct in their outlook - interest rates are going to fall this summer. In the meantime we have to take markets as they are presently. The 10yr is refusing so far to break and hold below 2.70%, until that happens we take it one step at a time. The future remains cloudy regardless of one's opinion.

In summary, rates got a little reprieve from today's Fed minutes, dropping slightly after their release. In this case, no bad news (in Fed minutes) equals good news for borrowers. If you missed locking yesterday, and didn't see better rates this afternoon, I would think floating until tomorrow is worth the risk.

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