The Week in Review:
What a huge week of news and events. The Fed announced it would inject another $600 Billion into the economy by participating in another round of Quantitative Easing (QE). QE is a program where they will purchase Treasury Securities in a bid to keep the economic recovery on track. The Department of Labor also announced the creation of more jobs than expected which is a good sign for the economy.
So how did it affect home loan rates? The week was unusually volatile as expected with a net decrease in rates by approximately .125%.
What to Expect:
So, will the Fed’s interaction drive rates down further? While it’s possible, but there are three factors that will cause headwinds for further decline and will ultimately cause rates to go up:
- QE is designed to spur consumer and business spending which will in turn create inflation (the arch enemy of low rates);
- Lower unemployment by supplying an economic boost good economic news causes rates to increase;
- As the economy picks up, the stock market should see gains which will pull funds from the bond markets further causing rates to increase.
Most feel we’ll see an increase in rates by early to mid-2011. How the markets react in the shorter-term is harder to determine.
Breg-ometer:
Next 7 Days: While the 1st reaction to the Fed announcement was a rate decrease, we get the feel rates will increase over the next few days with little economic news this week.
Next 30-90 Days: Neutral: No picture developed last week to indicate a direction.
Courtesy of:
Bob Bregitzer
Southeast Mortgage
[where: 30080]