MORTGAGE RATES LOWER AGAIN: On a shortened week, the bond market went up every day. Bonds closed the week 28 points up, improving the costs of loans about .25% on the week. The 30 year fixed par rate dropped down to 4.75% – this rate costs about a point right now. 15 year fixed lowered to 4.125% and 5/1 ARMs lowered to 3.125%.
FED MEETING THIS WEEK ; WHERE WILL RATES GO?: The FED is meeting Wednesday and Bernanke will follow the meeting with a first ever 45 minute press conference – typically they just release a statement. How the statement and conference goes usually pushes rates one way or the other.
Last week S & P downgraded US debt. US Treasuries and mortgage rates are closely tied. The Fed pushed mortgage rates down in December of 2008 by purchasing mortgage backed securities. This systematic buying of mortgage backed securities is slated to end in June of 2011.
The FED is able to purchase these securities by printing money and selling treasury bonds. With the downgrade of US Debt, it seems to be only a matter of time before investors demand higher returns, pushing mortgage rates higher.
Although we have seen rates improve over the past two weeks, it seems only a matter of time before they have to continue to go up. Based on technical indicators – rates can not go much lower without a major shift in the market. Check out this great article from mortgagenewsdaily.com, explaining why it is very unlikely that mortgage rates will go much lower: http://www.mortgagenewsdaily.com/consumer_rates/208606.aspx
The risk of rates going up far outweigh the small gain you may get by floating a rate. My advice is to lock in a rate if you are in process or thinking about starting a new loan.