Mortgage rates were unchanged yesterday as the markets were closed due to Presidents Day. This morning mortgage backed securities are up slightly in early trading. There’s not a whole lot in the way of scheduled news today, and the safest bet is that rates will likely end the day close to flat. I think there is some risk that we could see rates rise tomorrow depending upon the tone of the FOMC minutes with regard to asset purchases.
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As I mentioned above, I think that the primary cause for the rise in mortgage rates in January is fear/uncertainty over the timing of the end of the Fed’s asset purchase program. This is why I think there is some risk of rising rates when the notes from the last Fed meeting are published tomorrow. I don’t see much reason for the Fed to change course any time in the near future. We do not appear to be close to hitting either 6.5% unemployment or 2.5% inflation, which are the figures that the Fed has targeted as triggers for changes to monetary policy. Additionally, economic conditions in the U.S. are fairly stagnant, and global economic numbers are getting worse. It doesn’t make much sense for stimulus to end any time soon. Any rise in interest rates would snuff out the nascent housing “recovery,” which I believe to be largely illusory and unsustainable.
Nevertheless, tomorrow’s minutes will be carefully scrutinized, and if there is even the slightest hint that the Fed may taper off asset purchases or anything of that ilk, look for rates to rise tomorrow afternoon.
Switching gears, there’s still no progress on the sequester cuts, and with Congress on vacation this week, I don’t think we’ll see a lot of movement. The Republicans are pretty well divided over the issue, and the President seems to be advocating for a short-term delay that would allow more time to come up with some sort of budget compromise. The whole thing is a mess, and I’m sure some sort of half-assed last minute compromise will be made (the cuts, which fall heavily on the military, are scheduled for March 1).
Anyway, another slow day where I don’t believe we will see a whole lot of rate movement.
Today’s Links:
NYT: Chinese Army Unit Is Seen as Tied to Hacking Against U.S.
Massachusetts Real Estate Law Blog: The First Circuit Strikes Again in Culhane v. Aurora Servicing! Grants Borrowers Legal Standing to Challenge Mortgage Assignments, But Upholds MERS System.
Deadspin: The Only Reason We Know Roger Goodell’s Salary is That The NFL is Structured as a Non-profit To Avoid Taxes. I don’t know what is most absurd: that Goodell made $30m in 2011, or that the NFL is a nonprofit.
Reuters: Notes From the Pole of Cold. I will no longer complain about the blizzard.
Washington Post: Bourbonomics 101: What the Maker’s Mark Dilution Debacle Says About Corporate Strategy.
Project Syndicate: The Collateral Damage of Europe’s Rescue. There’s at least one more shoe to drop here.
Esquire: What You’ll Never Find on the Internet.
Bill Moyers: Ten Great Presidential Speeches.
Dave Dayen: Yes, Katrina, Wall Street Won Again, and Progressives Need to Face Up to That.
Matt Taibbi: At Least We’re Not Measles: Rationalizing Drone Attacks Hits New Low.
Slate: The Hecklers Who Ruin Simpson and Bowles’s Breakfasts. They deserve it.
The Economist: The End of Flight Mode.
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