Mortgage Market Update
In spite of the fact that many people had their eyes on Hurricane Isaac this week, one surprise came from Fed Chairman Ben Bernake that caused the stock market to see-saw on Friday and mortgage rates to tick slightly lower. The mortgage market update came as a suprise from the Fed hinting more action may be taken shortly.
It is no great surprise to any of us that the economy is still struggling. Fortunately, not all the news is bad. Home sales for July saw an increase of almost two percent over June. This is the highest recorded number since April of 2011. In addition, second quarter GDP (gross domestic product) was slightly higher, 1.75 versus 1.50. Unfortunately, many studies show that consumer confidence is continuing to decline, it’s lowest level for the past nine months.
Fans of the Fed taking action were pleased to read the minutes that were released from Chairman Bernake’s speech in Jackson Hole, Wyoming. There is every reason to believe, according to these minutes, that the Fed will take additional action by using Quantitative Easing (QE) for the third time this year. This news sent the stock market on a bit of a roller coaster for Friday finally ending the day up slightly over 90 points.
Critics of Fed using this type of policy claim that buying treasury bonds back from the mortgage market can be hazardous, resulting in high volumes of bonds that can flood the market and cause a loss of liquidity. Critics also charge these purchases do nothing more than diminish the value of the dollar. Nonetheless, the markets reaction and the slight drop in current mortgage rates reveals that most in the financial sector believe that QE3 will be a necessary step to getting the economy back on track.
Disclaimer: This blog is for informational purposes only. The weekly mortgage market update is our opinion and should not be used in making a mortgage rate lock decision. NMLS #849597