Weekly Mortgage Rate Update March 17, 2008
Where We’ve been: This St Patrick’s Day Monday Mortgage rates began the day improving after weaker than expected economic news and EARLY stock losses. These losses on the stock markets are a result of the news of the Bear Stearns bailout raised concerns about the stability of the U.S. banking system. Not to mention the news of the Fed’s rare Sunday evening announcement to lower the Discount Rate by a quarter-point. The discount rate is the rate that the Fed charges banks for loans and is considered less important than the benchmark Federal Funds rate that will be addressed at tomorrow’s FOMC meeting.
Where We’re At: This holiday-shortened week is moderately active in terms of economic releases scheduled to be posted, however, it does bring us another Federal Open Market committee (FOMC) meeting. There are four reports due to be released this week, with one of them considered to be of high importance. The first piece of data came mid-morning today when February’s Industrial Production report. This report measures manufacturing sector strength and revealed a drop in output. This is good news for the bond market and mortgage rates since it adds fuel to the theory that the economy is in a recession already.
Where we’re Going: The FOMC meeting begins early tomorrow and is expected bring another sizable cut short-term interest rates. Many analysts are predicting a .50 cut,
but the .75 is a possibility. This cut could go either way, if it’s a .75 rate cut then bonds will rally the bond market and lead to lower mortgage rates, while only a .25 drop could be considered as bad news for bonds and lead to higher mortgage rates. Let’s watch this one closely.
What will likely cause volatility in the markets is the post-meeting statement. Traders are hoping to pick up an indication of future Fed moves, particularly if the Fed expects to cut rates again anytime soon. It is often the post-meeting comments that cause the most volatility because the Fed move is often predicted. However, there are plenty of different opinions on what the Fed will do at this meeting, therefore, the move itself and the following statement could both cause significant movement in the markets.
Forecast:
Overall, look for tomorrow to be the most important day of the week due to the FOMC meeting and PPI release. The rest of the week will likely be driven by outside 
factors such as stock movements. If the stock markets stage a significant rally or sell-off, we should see bonds move in the opposite direction (which = lower rates). The bond market will close early Thursday and remain closed Friday in observance of the Good Friday Holiday. There is a possibility of seeing additional volatility in the markets as investors prepare for the long weekend. If considering financing/refinancing a home, I would Lock if my closing was taking place within 7 days.
If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!
March 19, 2008 at 1:48 am
Hi:)
My husband and I have just signed a contract to purchase a home (03/18/2008). We are looking at a closing date of April 18th. What would you recommend we do….lock in now, or wait a couple of weeks? If wait, what should we “look for” to know when to lock in? We are amateurs in realm of the stock market.
Thanks,
Debbie
March 19, 2008 at 2:23 am
Debbie – Although, we all wish we could be certain about where interest rates will go, here are a few tips on what to watch to narrow down your estimates:
1. Economic Reports – Daily there are economic reports that are released that tell us information of how the economy is performing. These reports cause investors to react on Wall street. If you have a source of what reports are ready to be released, as “The Property Tip”, then you get a forecast of what is coming.
2. Mortgage Bonds – Mortgage interest rates are directly attached to the performance of mortgage backed securities (MBS)or mortgage bonds on Wall street. Getting good at watching the performance of these MBS can give a great prediction of where mortgage rates will go. Remember, Stock and bonds go in different directions.
Compare these tips to previous blogs and it can be a legend to assist you in how our forecasts are reached. Really, although I admire your vigor to understand rate fluctuations, becoming an expert in the stock market is not your job. Your Mortgage Professional who is seeking your financing for your new home should be able to give a daily update as to how the MBS are performing in real time and estimate rate changes on your behalf. Anyone who is giving you the current rates are giving you yesterdays news.
In my office, everyone has this info at hands grasp. Likely, You may do this 4 or 5 times throughout your life, but we do this every single day. Its your home and your future; its our profession and our passion, so we should look out for your best interests!