Wednesday, August 17, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates were again flat as it stayed in the range it has been for over a month. Today we had another FOMC minutes release, which by all accounts was another nonevent. The minutes can be twisted anyway one wants to but the bottom line is no increase in rates in September regardless of what Wm. Dudley commented on Monday. That is not only what I believe but more importantly what the markets believe.
On the release media went semi-postal as they usually do with every kind of interpretation imaginable. All you need to know is the markets did not react expect to improve a little after the minutes did not change anyone's belief. Still have some that worry over a move next month but the proof of the pudding is in the eating. The 10yr note and MBSs traded again in the same range.
The Federal Reserve and the other central banks have backed themselves into a corner and have no idea how to get out of it. I cannot say it often enough, the Fed is irrelevant now - way too many opinions that are finally gagging markets. Whatever Fed officials and FOMC meetings have to offer it is best to simply listen but then turn to the bond and currency markets market for what investors and traders are actually believing.
As long as the 10yr is trapped holding rate locks does not reward the risk. How long will this tight trading range will last is difficult to forecast but I will say this, when it breaks it will be a swift reaction in the direction of the breakout. The longer the 10yr stays within its 10BPS range the bigger the reaction when it breaks through.
In summary, with the Fed July Minutes out of the way now I would be inclined to float my interest rate if my closing were beyond 30 days. However, I would make sure you're ready to lock quickly if events move unfavorably. For locks of 30 days or less I would still be inclined to lock what are still some of the lowest interest rates for mortgages we've seen in our lifetimes. In the current environment, it will be much easier for rates to move higher than it will for them to go lower. Evaluate your own risk tolerance of course.
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