Mortgage bonds are holding their ground this morning as weakness in the stock market allows bonds some room to breathe. Yesterday’s release of the most recent Fed Meeting Minutes gave investors little to base decisions on as a time line was not established for Quantitative Easing. It seems the Fed is nervous to pull the trigger in an environment of stubbornly low levels of inflation. They would rather start such a move once inflation numbers begin to climb. However, most are still banking on a September start to the new plan. At which time, we will see more upward pressure added to mortgage interest rates.
In an interview with Bloomberg, HSBC’s Steven Major made some strong predictions calling for lower yields on the 10 Year Treasury Note by the end of this year. In his opinion, we will see yields fall to 1.9% from the current 2.22% we now have in the market. He talked of the Fed’s uncertainty as to how markets will respond to Quantitative Tightening and that they now seem to be showing the humility of being honest about it. He sees inflation heading lower, which he believes will keep the Fed from raising rates and from being too quick to implement QT. If Major’s predictions are right, we could see lower mortgage rates ahead. Therefore, if purchasing a home, consider a no-cost mortgage so you can take advantage of lower rates in the future. However, this assumes you are willing to bet on Major’s predictions.
Take a look at our Rate Comparison Tool to see the benefits of a no-cost loan.
Given the strength of the ceiling not too far above current levels, we will maintain a short-term locking bias.