In my last few posts, I discussed the issues facing the Fed in controlling mortgage rates and the bond market. Not much has changed over the last week, although bonds are trying to mount a rally at the current level. We are seeing a conflict between bonds and stocks. As the perception of an improving economy continues, stocks rise and bonds sell off. Unfortunately, our economy still requires exceptionally low rates to stimulate the housing market and the costs of borrowing. If the fed prints too much money to buy bonds and support the bond market, the dollar declines and sets up inflationary pressures. So, right now the Fed is between the rock and the hard place. My perception is that the Fed will work overtime to support the bond market and try to push mortgage rates below 5%.
Anyone who has not refinanced should get another opportunity as we approach the fall season.
I think it will take time to see ultralow rates again unless we see more issues arise in the stock market or banking sector.
Tuesday, June 9, 2009
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