Mortgage rates have continued to hold very steady recently as economic news has fluctuated between positive and negative. On the positive side, Gross Domestic Product has ticked up to 5.7% for the final quarter of 2009. While the respected ISM Manufacturing Index did slow to a reading of 56.5, this remains well above 50.0. Any reading above 50.0 indicates that manufacturing is growing. Retail sales also showed signs of expansion, however, other indicators are pointing to weakness in this nascent economic recovery. Housing continues to struggle to find its footing, and Consumer Confidence plunged after three months of steady growth. While the unemployment rate is holding steady, the economy continues to slowly bleed jobs.
Over the last year, we’ve become very accustomed to direct government intervention in the secondary mortgage market. At the end of this month, the Fed’s program of buying mortgage-backed securities will expire. While many analysts are predicting that rates will begin to increase at the end of the month, there are many other things happening that may directly impact mortgage rates. Both Fannie Mae and Freddie Mac are now under government conservatorship. The future, and even the existence, of these companies is not guaranteed. There are proposals to strengthen the companies, and there are proposals to completely start from scratch. Of course, there is little doubt that the US government will continue to play a major role in housing. How this plays out will be very influential for mortgage rates, and for the housing market as a whole.
With the recovery proceeding at a muted pace with both good and bad news effecting rates, we’re likely to see mortgage rates remaining fairly steady through March. However, factors outside of the market could cause some unexpected fluctuations. So, is uncertainty in the mortgage market a good thing? It probably is, that is, as long as that uncertainty means we’re moving toward normalized markets and a healthy economy.
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