Friday, July 22, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates have been steady for the past several weeks, but in all reality, have inched their way up to the highest levels this month. Do not get me wrong, we are still very attractive with these rates, as the movement has been extremely small, but we are not at the levels seen on July 6th.
Somehow, as busy as I have been with the influx of business, I sometimes feel like I have not done my job as it has been one of the quietest weeks I have seen in our industry in a long time when it comes to the bond market. The stock market was flat as well this week. The big news of the week was the Housing data for June as it was better than forecasted. The Republican convention dominated what news there was. This week was one where a vacation would have been nice - like watching grass grow in the desert. That all said, it was what it was. There was no change in the 10yr note, and outside of intraday trading, nothing was moving in the MBS markets.
There was another terrorist attack today, this time in Munich, Germany at a shopping center. These kind of events are obviously increasing, but the markets are not reacting as much as they used to. These kinds of attacks are one of the reasons that the Brits wanted out of the EU in order to have more control over immigration.
The bellwether 10yr is holding technical support at 1.60%, as it held every day this week. Is this the high yield and will rates slip back lower? Depends primarily on the FOMC policy statement next week and whether markets take away belief the Fed is poised to increase rates. Mostly tough we want to see what the Fed and other central banks have to say about inflation. I do not see it nor do I expect it but markets are like sheep, going with any 'official' especially the Fed whose track record is poor at best.
Next week we have a lot of date to sift through along with the Democratic Convention. Some of this may have the rates go from "generally flat" to "generally moving" in one direction or the other. I really do not see a push at this time to head back to all-time lows, so it makes more sense to guard against the possibility of the next move being higher, until it can be ruled out.
In summary, although we have ticked higher in the last few weeks on rates, pricing still remains very favorable. I still feel the recent move higher was purely a consolidation of the bigger move lower. Next week brings a bit more action that may sway the markets in a more favorable direction. Remember, the world's economic problems are not fixed, and the momentum is constantly pushing us toward lower rates. Borrowers with time to spare can and should explore this possibility. Loans closing in the next 15 days should lock due to timeline restrictions.
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