Mortgage Rate Update March 20, 2014

Mortgage rates rose at the sharpest pace of the year yesterday following the Fed’s post monetary policy meeting. Hopefully borrowers followed our advice on Monday when I shifted to a locking outlook.

On a side note, one reason why those of us in the industry don’t like the weekly Freddie Mac primary mortgage market survey is because it can be misleading. Today’s report is headlined “Mortgage Rates Move Down a Tad.” Oops, this is because the survey collects data Monday-Wednesday and reports results on Thursday.

Following the meeting the Fed announced that it would taper quantitative easing (QE) by an additional $10 billion.

This part of their statement was not what spooked the markets. The Fed went on to state that they intend on raising short-term interest rates about 6 months following the end of QE, which is expected later this year. This comment did catch the markets by surprise.

Prior to the Fed’s comments yesterday most analysts had forecast that the Fed would hold off on raising short-term interest rates until late 2015 or early 2016. However, the markets now have accelerated these expectations to the first half of 2015. Although short-term interest rates DO NOT directly impact mortgage rates it still impacted the markets yesterday.

To compound the issue, better than expected economic data out today could pressure mortgage rates higher. I will maintain a locking bias.

Current Outlook: locking