Well yesterday was a good day for rates. We had a very modest improvement and on the opening this morning, MBS ( Mortgage Backed Securities ) are up +4/32 because import prices ex-oil fell -0.2%, which is lower than expected.
As the economy improves ( at least the look and feel of it!! ) word is that credit card rates and mortgage rates will begin to rise. Right now inflation is low so there is not a huge pressure to raise mortgage interest rates. The Feds are committed for the short time to help insure low rates.
The question at hand is how will the market play out with the 3+ million foreclosures that have not hit the bank books yet, the 42+ bank failures this year (which projections indicate that we will exceed the 140 banks that failed in 2009), and the fact that the stock market has been inflated with printed money by the government!!
Inflation is truly a concern, however, if the stock market declines, bonds will do well which in turn will continue to keep rates low. We need to keep rates low and confidence to help the housing market. It's a double edged sword and the administration knows it!
Thorsten Bernacki
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