Today is Fed day. This is the day when the Fed concludes their Open Market Committee Meeting (FOMC). The meetings are followed up with an announcement on where the Fed sees the economy and any changes to policy they intend to make based on their projections. FOMC meetings occur only 8 times per year (roughly every 6 weeks). Each of the past few meeting announcements have sparked major selloffs in the bond market, which has temporarily pushed mortgage pricing higher. If they divert from their “patience” policy on when to move rates higher, the market will likely sell off again. However, if they cite low inflation, low oil prices and other lower economic indicators as a reason to maintain “patience,” mortgage bond pricing will likely improve and finally be pushed above the overhead resistance that has prevented mortgage rates from dropping back to lows from 6 weeks ago.
Oil prices continue to be a major economic concern, with oil dropping to $42.38 per barrel this morning. A price beneath $45 per barrel is a real sign of trouble for the energy sector. With the threat of sub-$40 prices appearing imminent, the destruction in the oil industry is far from over. Although we should be seeing gas prices fall beneath $2 per gallon once again very soon, the downside to low oil prices is painful for many. As prices fall, oil rigs shut down. With each rig employing approximately 350 workers; the toll can be heavy for the families impacted; although we haven’t yet seen the majority of losses reflected in the job report figures. However, they are coming
With the Fed announcement just ahead, we are either going to see rates move higher or pricing improve. History tells us that the risk of floating on such day is extremely high. Therefore, the safe play will be to lock. If you choose to float, have your finger on the lock trigger right at 12:00 pm MST. It will either be an opportunity to see improved rates or lock before pricing deteriorates too quickly.