Thursday, March 17, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates improved at their quickest pace in several weeks today as banks adjusted wholesale rates to reflect some of the market improvement seen after yesterday's Fed Announcement. Yesterday's gains in MBS suggested bigger improvements in rate sheets, but banks have consistently been cautious about being too quick to match market movements due to recent volatility. As such, it was not a surprise to see them wait for the strong move in underlying markets to be confirmed before passing along more of the gains.
Also I would like to point out that every major media outlet that covers financial news will have a story that this week's mortgage rates are higher than last week's - and even though that was true, we are seeing a reversal with the last two days of improvement. The reporting is not wrong, it is always a week behind.
There was not much movement throughout the day after a strong early push, then a stop after economic reports started to roll in as I noted in this morning's report. The markets are still adjusting to the FOMC and Yellen yesterday, and we did see the stock market rally this afternoon on higher oil prices and the weakening dollar that is seen as a boost to US exports.
Oil demand is at its highest level in years but supply, although slowed is just a step away from increasing production. The decline in the dollar after the Fed's comments yesterday sending the price of oil lower. Crude easily driving above $40.00 and another penetration of a resistance level. Crude trades in dollars, the dollar weakening in itself would drive oil higher.
Even though I continue to expect lower interest rates later this year, right now I am not overly optimistic on what is happening in the market. I suggest using the current rate improvements to get deals completed, particularly for loans current in the process. The 10yr has not turned technically and is still negative. I can make a case for whichever way you want, lower rates or higher - price action has yet confirm more buying, just covering from the recent increases.
In summary, it is always encouraging to see pricing improve for multiple consecutive days. As long as the Fed foresees economic challenges, either domestically or globally, rates will have difficulty moving up much. Borrowers just starting their loans may want to float, provided they have some risk tolerance.
This the beginning of the NCAA tournament and many will focus is turning toward the most basketball of the year in the next four days. Also, I have some personnel issues with a death in the family so the reporting for both Friday and Monday may be sporadic, but I will have an evening report each of those two days.
Happy St. Patrick's Day to all my readers from The Godfather. Just remember all you Irishman, that St. paddy was an Italian by birth.
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