Tuesday, October 8, 2013

Mortgage Rates Slightly Higher, but Maintaining Recent Range

Mortgage rates moved higher today, but remain in the range of recently lower levels that has persisted since late September.  Conforming, 30yr fixed best-execution remains at 4.25% though the closing costs would be slightly higher today vs yesterday, or the lender credit slightly lower, depending on your scenario.
Prices of 'mortgage-backed securities' that dictate loan pricing (MBS) and other sectors of the bond market have been holding inside an uncommonly narrow range since the government shutdown began.  Bond markets are intensely interested in the economic data that's been postponed by the shutdown.  Until the data becomes available, it will take something significant to motivate bigger movement.
The first such "non-data" event arrives tomorrow, in the form of the Minutes from the most recent FOMC Meeting.  This isn't as important an event as the periodic FOMC Policy Announcements, but it may provide additional insight as to how the Fed will approach it's next meeting at the end of the month.  There has been some suggestion that Fiscal uncertainty will prevent the Fed from considering an adjustment
While this makes sense from a logical standpoint, it might make even less sense for the Fed to forgo tapering if the economic data justifies it.  It will be hard for the minutes from a meeting that finished on September 18th to speak to market conditions that didn't begin in earnest until October 1st, so there is a fair chance of an uneventful reaction.  In general, the less aggressive the Fed seems to be about decreasing their asset purchases, the better for rates.

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