Monday, October 21, 2013

Shutdown is over - Now what?

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Forwarded exclusively by:
Bob Rosenbaum
The Rosenbaum Lending Group
Office: (703) 879-5200
NMLS#: 649782
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Monday, October 21, 2013
What happens to rates now that the government shutdown is over and the debt crisis has been averted?
Now that Washington D.C. has gotten our government up and running again, and the fear of defaulting on our debt has been pushed off until after the new year, where does that leave mortgage interest rates?

1)  Talk of tapering has all but disappeared
   In September, the markets were driven on speculation of Fed tapering back the purchases of Treasuries and MBS that are part of QE3.  The fear of tapering helped to drive interest rates up, with concern that actual tapering would lead to even further mortgage rate increases.  However, the government shutdown is expected to have a strong slowdown effect on our economic recovery, which has pushed back all talk of tapering.  Added to that is the transition next year of Fed Chairman from Ben Bernanke to Janet Yellen, which will also delay talk of tapering.  This is good for mortgage interest rates. 

2) There will be a flood of economic data releases
   Expect intraday volatility as many missed economic reports will be released now that the respective government departments are back to work.  Although September data points are not likely to be seen as affected by the shutdown, the data isn't likely to garner as much credibility as usual with traders as the markets try to assess how serious the shutdown's impact was on consumers and future job growth.  This could cause volatility with mortgage interest rates.

3) The government shutdown is expected to stunt the economy 
   Many economists feel that the government shutdown was bad for the economic recovery.  Just how bad though has not been calculated yet.  Regardless, when the economy stumbles, that always bodes well for MBS (Mortgage Backed Securities) and the bond market in general.  Until we see that the economic recovery is back on track, it relieves pressure from mortgage rates.  This is good for mortgage interest rates. 

Last Week's Mortgage Rate Recap
Mortgage Rates Currently Trending: LOWER
Last week saw rates improve an average of .250%, depending on the lender, as MBS (Mortgage Backed Securities) pricing improved on news of the government shutdown being lifted and the debt crisis being averted.  They did run out of steam however as they approached the 102.00 Resistance Level, meaning that our march to lower rates may have run out of steam.  We have been trading within the same very tight trading channel since the Fed announcement not to taper on September 18th.     

This Week's Mortgage Rate Forecast
Mortgage Rates Forecast: NEUTRAL, but high threat of volatility
This week we will be dealing with MBS pressing up against the 102.00 Resistance Level, as well as the release of economic data that was not released due to the government shutdown.  There is no reason for us to see a large increase in rates, but we may see an increase of .125% to .250% this week if the 102.00 Resistance Level holds.  However, if we can convincingly break above this level, we may find better interest rates on the other side.     

BOTTOM LINE: There is risk to floating right now, but also potential reward. The best course of action is to stay in contact with your Mortgage Loan Professional to watch the market in real time to stay a step ahead of lender reprices and market trends to protect your mortgage rate.

RateAlert’s Most Trusted Mortgage Lending Professionals: 
Loan Professions that subscribe to RateAlert Executive services have the training and market knowledge at their fingertips, along with live trading data during market hours to expertly help navigate the difficult and often times confusing process of understanding rate movements and which factors may cause volatility when considering whether or not to lock.  If you’d like to learn more about what things to consider when timing the market in an effort to obtain the best interest rates, don’t hesitate to contact the person who sent you this commentary.

This commentary has been sent to you by the Mortgage Loan Originator (MLO) above because they thought you may find it interesting or helpful. The views and opinions offered do not necessarily represent the views of your MLO. Please contact them with any questions or to find out more about the information listed herein and how to work with them


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