From Stuart Crawford at V.I.P. Mortgage:
The Fed’s shifting expectations for monetary policy last week, was the primary influence of mortgage rate movement. Fed Chief, Bernanke, eased investor concerns about tighter monetary policy, causing mortgage rates to end the week slightly lower, reversing most of the prior week's increase.
To boost the economy in recent years, the Fed has used a variety of tools, which helped push mortgage rates down to historically low levels. Now that the economy is improving, Fed officials have indicated that it may soon be time to begin to scale back one of its tools, the bond buying program (or QE / Quantitative Easing). As expected, mortgage rates reacted to the announcement on June 19th by climbing higher, but the magnitude of the move surprised many investors (as we experienced an unprecedented “rate spike”). Since then, there has been a great deal of uncertainty about the timing for the Fed to begin to actually tighten monetary policy.
Following the stronger than expected Employment data released on July 5th, investors shifted forward their expectations for Fed tightening, and mortgage rates swiftly increased yet again. Although, sentiment reversed last week due to Bernanke’s speech on Wednesday when the Fed Chief strongly stated that Fed officials feel that "highly accommodative" monetary policy will be appropriate for an extended period of time. Bernanke's comments soothed many investors, causing stocks to rise and mortgage rates to fall.
Regardless of the slight improvement we have seen in rates, I am still taking a “Locking Stance” on all new loans at this time. It is a true gamble floating the market right now in hopes of better interest rates, as the volatility is so high. Now is the time to get our clients into new mortgages, and get the rates locked.
Stuart can be reached at 602.710.8975
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