Mortgage Rates to Extend Fall?, June 22, 2011
Mortgage rates to “extend” fall?
Up or down? That simple question is the purpose of this daily article. Should consumers wanting to purchase a home or refinance their home mortgage lock-in an interest rate? Today that question is exceedingly hard to answer. My best analysis is that rates will improve slightly this morning in response to the decision to support further austerity in Greece and expectations that the Federal Reserve will keep their current policies in place for an “extended” period of time.
Most market analysts are cheering the decision by the Greek parliament to keep the current government in place. The surviving government has indicated that it will support the five-year spending cut plan that European Union members insisted on prior to release of billions in bailout funds necessary to avoid default. While this apparently solves the immediate issue it clearly does not solve the likelihood of Greek default in the near future. One analyst stated this morning that the decision was “not positive” for the markets but was a “non-negative”.
With Greece providing some early support for lower rates today, the question becomes…will it last? The answer is that it depends on whether we hear the words “extended period of time” from the Federal Reserve this afternoon. If in its policy statement the Federal Reserve states that rates should remain low for “an extended period of time” then rates will likely hold lower levels. If however, Chairman Bernanke in his post Open Market Committee meeting news conference indicates that the Fed will end its Treasury securities purchase program on June 30 and sees a high threshold for further stimulative action, that will suggest that rates will not remain low for an extended period of time.
Today will either “extend” the recent drops for mortgage rates or signal that a floor has been reached. All ears will be listening to Chairman Bernanke this afternoon. Smart mortgage shoppers will lock loans this morning if possible.
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