Interest rates moved down again a bit this week but new brighter economic news may indicate an uptick in rates next week.The following are excerpts from the newsletter on interest rates published by HSH Associates :
“A cascade of fresh economic data came out this week, variously reflecting economic conditions in both March and April. A “big picture” look at the data might lead one to an “economy is still troubled” conclusion despite the current 2.5 percent run rate for Gross Domestic Product.
Mortgage and other interest rates had been on a flat to easing trend for much of the week as most of the data did little to dispel the notion that we remain in a rough patch, one even the Federal Reserve implicitly acknowledged at the close of its meeting on Wednesday.
There was plenty of downbeat news available this week to create additional cause for concern, but one or two shining reports took the gloom out of the market, at least for now. Mortgage rates are likely to rise somewhat next week as a result.
The Federal Reserve held a regular policy meeting on Tuesday and Wednesday. No changes to interest rates or QE3 came as a result of the get-together, but there was a subtle change in wording about these unusual economic support tactics. “The Committee is prepared to increase or reduce the pace of its purchases to maintain policy accommodation…” noted the Fed. No releases which followed the end of previous meetings since QE3 began have mentioned the possibility of expanding these programs, and recent market buzz has been centered around their demise, whether all at once or though a processing of “tapering” off Treasury and MBS purchases. That the Fed might consider increasing the size of the programs does reveal that they are worried about the slowdown at the end of the last quarter and what seems to be the start of this one.There would appear to be plenty of reason for concern, too, since April’s numbers so far are coming in little better, if not worse, than March.
As far as interest rates go, it took an accumulation of fair economic news over a period of months and some considerable market optimism about the economy’s future to bump them up during the late winter and early spring. That trend did an about face over the last six weeks or so as the economic news turned decidedly darker. Is the employment report the start of a new spate of solid news, or simply a bright spot in an otherwise dim sky? One report doesn’t change the overall trend, buy may be enough to allay concern about a deeper downturn forming.
For the moment, the brighter employment picture on Thursday and Friday was sufficient to cause a reversal in the decline in interest rates. The influential 10-year Treasury bounced upward by more than a tenth-percentage point on Friday, so it’s to be expected that at least some of that will show in mortgage rates as we round into next week. Many popular mortgages have been easing to record (or near record lows) but will move away from them next week, when a 5 or 6 basis point rise .”
The following are interest rate quotes from Al Hermann of American California Financial:
30 Yr Fixed FHA
Conforming 30 Yr Fixed up to $417000
Conforming Jumbo 30 Yr Fixed $417001 – $625500
Jumbo 30 Yr. to $1.5 Million
Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)