Mortgage Rate News: Week of March 22, 2010

Mortgage Rate News: Week of March 22, 2010

March 22, 2010

Mortgage rates have remained fairly level for a very long time, contrary to the predictions of most experts. Last week, mortgage markets closed unchanged. Monday through Wednesday we saw rates improve only for a sell-off on Thursday and Friday to undo the gains.

The sell-off from last Thursday andFriday may signal that markets are preparing for change.

One key event from last week was the Federal Open Market Committee’s scheduled Tuesday meeting. Upon adjournment, the Fed voted 9-1 to hold the Fed Funds rate in its current target range near 0.000% and reiterated its plan to keep rates low for “an extended period of time”.

The Fed specifically mentioned that its $1.25 trillion mortgage buyback program will end, as planned, March 31, 2010. This could force rates higher over the next two weeks because, according to the Fed, the existence of a buyback program forced rates lower by 1 percentage point in 2009. When the program ends, it’s expected that markets will give back some of that 1 percent, leading to higher mortgage rates.

This week, in addition to the buyback program’s looming end-date, there’s several other potential influences on mortgage rates:

The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
The New Home Sales data for February is released Wednesday
Consumer Confidence data hits Friday

Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.

But there’s one wildcard this week and that’s the aforementioned Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Typically, Fed members stay on message when making public appearances, but Hoenig is expected to talk about why rates should be higher, and what the Fed needs to do to prepare the economy for late-2010 and beyond.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.

Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.

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