This week mortgage interest rates went on a wild ride, varying by as much as .25% from this week’s high and low. As of this morning mortgage rates slightly lower than they were Monday morning.
On Monday and Tuesday rates were slowly drifting higher and many people in the mortgage industry were starting to get nervous that higher rates was going to be the new trend. The main reason we saw rates moving up was because of continued confidence in European leaders to resolve their debt problems. Another reason was that there had been a few good US economic reports and with the improving economy people were starting to doubt that the Federal Reserve(FED) would do another round of quantitative easing which would stimulate the economy by keeping/pushing rates low.
This all changed on Wednesday when the minutes from the last Fed meeting were released. Usually there are not any big surprises in meeting minutes, because by the time they are release most investors already know what the Fed discussed, but this wasn’t the case this time. According to the minutes the FED still seems set on another round of easing. The news of another possible easing sent the mortgage bond market through the roof and completely reversed the higher rate trend we were seeing. This was followed up by some bad US economic reports today to support the reasons for another round of easing.
The FED still has not confirmed they will do another round of easing or exactly what it will entail. Most investors are expecting it to take place in September and involve purchasing long-dated treasuries and mortgage-backed securities. The FED chairman Ben Bernanke is holding the opening speech at the Jackson Hole economic summit next Friday, and I think he will revile more information on any easing plans then.
As of right now the trend indicators on mortgage rates are neutral. If/when the FED confirms another round of easing that would put rates back in a downward trend. On the other hand continued success in Europe with resolving their debt problems will put an upward pressure on rates. I think next week will be a big week for rates as we could see another easing program unveiled and with a majority of European leaders back from vacation we could see the European debt crisis solution continue to succeed or fall apart.
Tags: Europe debt crisis, market preview, mortgage rates outlook