Mortgage Rate Update November 29, 2012

Mortgage rates are unchanged this week.

Two headlines yesterday tried to pull interest rates in opposite directions. First, the WSJ reported that the Fed is close to agreeing on an extension of monetary stimulus once “Operation Twist” expires at the end of the year.  This will be in addition to the $40 billion per month it is currently spending to purchase mortgage-backed bonds.  An extension will help keep long-term interest rates low.

In a separate article the WSJ reported that President Obama is willing to allow the top tax bracket to remain at it’s current level as lawmakers continue to try and work towards a deficit reduction deal.  This sparked enthusiasm that the economy will avoid the “fiscal cliff” and avoid recession.  Good news for the economy is often bad news for mortgage rates.

I still maintain that a deficit-reduction deal is likely to come at the last minute and be a temporary fix.  A real solution requires political courage which is something Washington DC has largely failed to display in recent years.  In the meantime, rates should remain low.

In case you missed it the Standard & Poor’s Case-Shiller Home Price Index showed that home values in Portland increased by nearly 4.0% from a year earlier.  According to the data home prices have increased every month since January 2012.

Given that rates have stalled at the current level I am a little concerned about the technical trading patterns so I am going to recommend a locking bias.

Current Outlook: floating