Mortgage markets closed unchanged last week, but that’s not say mortgage rates were calm. Monday through Wednesday, rates improved steadily before a swift, late-week sell-off unwound the gains.
Mortgage rates have been very low for a very long time — against the expectations of most market experts. The speed of the Thursday-Friday reversal may signal that markets are preparing for change.
One key story from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”.
Kansas Fed President Thomas Hoenig was the lone dissenting vote.
For rate shoppers , take note.
The Fed specifically mentioned that the its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010. This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009.
When the program ends, it’s expected that markets will give back some of that 1 percent, leading to higher mortgage rates for conventional and FHA borrowers.
This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:
- The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
- The New Home Sales data for February is released Wednesday
- Consumer Confidence data hits Friday
Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.
But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.
His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.
Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.