Mortgage Rate Update Janaury 28, 2013

Mortgage rates have risen sharply (+~.25%) since last Thursday.  This shouldn’t come as a huge surprise.  I’ve been recommending a locking bias since the beginning of the year.

The 10-year US Treasury note has led mortgage rates higher.  The yield on the 10-year treasury note is approaching 2.00%, the highest level since April 2012.  What is driving rates higher?  A few factors are to blame….

First, ever since the Fed released their meeting minutes from their December monetary policy meeting in which they discussed when to unwind bond-buying programs designed to keep interest rates low investors have been leery. The Fed will provide their latest comments on Wednesday and I expect them to reassure the markets that they are committed to keeping rates low in the near-term.

Second, the European debt crisis has quieted down substantially.  The upbeat sentiment has caused investors to unwind their “flight-to-safety” positions which is pushing US interest rates higher.

Lastly, the US economic outlook has been fairly positive over the past few weeks.  Positive sentiment over the US economy has sent US stocks to multi-year highs which is also bad for mortgage rates.

Speaking of stocks, from a technical standpoint they appear overbought in the near-term and bonds look to be oversold.  I am going to recommend a floating position with the hopes that we can recover .125% of the .25% we’ve lost since last Thursday.  If so, I will recommend locking in as I still think rates are poised to move higher over the long run.

Current Outlook: floating