Rates remained volatile last week as worries about inflation continued to influence the mortgage market. Volatility being what it is these days, mortgage rates are bouncing around quite a bit. Upward pressure for rates one day gives way to downward pressure the next, only to succumb to upward pressure again.
Inflation data continues to hammer headlines and our wallets. News this week demonstrated what we have all been feeling: prices are higher at the pump, the grocery store and anywhere else you use your debit card. Interest rates trade off of bond prices - and bonds HATE inflation. Coupled with this is the concern about a declining economy which could hold rates back a bit. But, the overall trend is higher interest rates for those seeking a mortgage in the coming months.
Fed Chair Ben Bernanke addressed Congress in the semi-annual report on monetary policy last week. While detailing the challenges facing the economy, Mr. Bernanke noted that inflation was above desired levels, and that upside risks for higher prices have "intensified" lately. A Fed seeing a higher rate of inflation usually leads to an upward move in the Fed Funds and Discount Rates at some point in the not-too-distant future. In fact, the Federal Reserve Open Market Committee explicitly noted at its last meeting that "with increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate."
This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all but one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing. Generally speaking, despite the lack of a data-packed calendar, I would still maintain constant contact with your mortgage professional.
- If you have an adjustable rate or need to get cash out of your home, don't wait for rates to go up even more.
- If you have found the right home to buy, secure your financing today.
Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.
Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB