Current Mortgage Interest Rates – Week of 10/22/12

Mortgage interest rates increase by a quarter percent with selling pressure proving to be too much for Fed’s QE3 purchasing power.  Nearly $100 billion in Treasury auctions, 3rd quarter GDP, and a FOMC meeting likely to make an impact on rates going forward.

What happened with mortgage interest rates last week?

Mortgage backed securities had one of their worst trading weeks in over 2 months, losing nearly 120 basis points before seeing a slight rebound on Friday.  The selling pressure pushed mortgage bonds beneath support before finding resistance at the 50 day moving average.  The move caused interest rates to increase by nearly .25%, providing another glimpseof how selling pressure can outweigh the Fed’s QE3 buying power.

The bond selling was largely influenced by economic releases and market news that began after the major inflation reading, Core CPI, was reported higher than expected.  Not so great news for the first major inflation reading following the launch of QE3.  Additionally, housing starts in September increased by 15% and Moody’s reported that they would maintain Spains debt rating.  Positive economic news and higher than expected inflation is a recipe for Stock buying and Bond selling.

Further selling pressures are coming from an influx of new mortgage originations.  As the low rates continue to increase home purchase loan and refinance activity, the added volume will continue to test the Fed’s QE3 purchasing power for months to come.

What’s coming up this week on the economic calendar and what’s the impact on interest rates?

The economic calendar is light this week with no major economic reports due other than a reading on third quarter Gross Domestic Product (GDP) on Friday.  The biggest news of the week will come with the Fed’s monetary policy statement on Wednesday at 11:30 am CT.  The statement will follow the two-day Federal Open Market Committee (FOMC) meeting.  While there are no major changes expected to the Fed Funds Rate or the QE3 mortgage backed security purchase program of $40 billion per month, traders and investors will be analyzing the statement line by line to make notice of any changes.

Also on the radar this week will be the Treasury auction of $99 billion in two, five, and seven year Treasury notes.  The added supply will give more options to investors and could sway purchasers away from mortgage Bonds until they establish further support on the 50 day moving average.

Here’s our strategy for the days and weeks ahead…

Following the large sell off in mortgage backed securities, Mortgage Bonds should technically hold on to current support at the 50 day moving average.  For clients that were not able to lock in their rate last week before the market moved, we are recommending they float into the FOMC meeting, anticipating that pricing can rebound after being oversold.  Should the market start to push Bonds below support, we will immediately shift to a Locking stance.  The next level of support is over 100 basis points lower and would translate to higher interest rates.

We maintain an ongoing dialogue with our clients about the market and interest rates throughout their financing experience so we can take advantage of the lowest rates when they present themselves. We all want the lowest rate, and the best way to ensure that you get the lowest rate, is to build a relationship with your mortgage planner, so they can best advise you on when to lock in your rate. Call us today for a complimentary mortgage review or Apply Online.