If you choose to float, be cautious….

Today is a slow economic reporting day.  However, the week heats up starting tomorrow when we will receive an updated reading of current GDP.  Then on Wednesday, we will receive an update on Personal Consumptions Expenditures (PCE), which happens to be the Fed’s favorite gauge of inflation.  With both GDP and CPE slated for this week, it will likely set the tone for the direction of mortgage interest rates in the near term.  So far, the Federal Reserve rate hike has helped improve mortgage bond pricing.  As long as these two reports come in at or below expectations, we could see mortgage interest rates continue to improve.

Mortgage bonds remain above a critical level of support and are now battling their 25 day moving average.  They are receiving support from oil prices which over the weekend hit levels not seen since 2004.  This adds downward pressure to inflation, which is the primary driver of interest rates.  Also supporting low levels of inflation is continued Quantitative Easing measures in Europe.  With European Central Banks purchasing approximately $60 billion per month in securities, this is import inflation to their economy and export deflation to the US economy.  This should help make 2016 another year of relatively low mortgage interest rates here at home.

With bonds continuing their run higher, there is no need to immediately rush in to locking.  However, if your choose to float, do so very carefully as sentiment can reverse quickly.