Commentary: News that China's central bank raised short-term interest rates yesterday morning for the second-time this year has combined with the likelihood the European Central Bank will nudge their short-term interest rates higher on Thursday to make credit markets uneasy. Federal Reserve Chairman Bernanke stirred the mix with comments he made on Monday night at the Atlanta Federal Reserve Bank Financial Markets Conference when he said the Fed will be monitoring rising domestic prices and inflation expectations closely. Against the global interest rate tightening background - all it took to make many credit market participants weak in the knees was the word "inflation" crossing the lips of the Chairman of the Federal Reserve. The mere discussion of the potential of a hike in the Fed's benchmark short-term interest rates has the power to keep the heat turned up on the prospects of higher mortgage interest rates ahead.
As they do every Wednesday, the Mortgage Bankers of America have released the mortgage application survey figures for the week ended April 1st. The overall number of mortgage applications taken last week declined by 2.0% on a week-over-week basis. Purchase money requests were higher by 6.7% while refinance applications dropped by 6.2%. The national average contract rate for a 30-year fixed-rate mortgage finished the week at 4.93%, unchanged from the prior week's level, unchanged from four weeks ago, but down 38 basis-points from the year ago mark. Refinance loan requests account for six out of every ten applications taken last week.
Against the push and pull of the current macro-economic background I believe trading activity in the stock markets will likely be the factor that tilts the trend trajectory of mortgage interest rates decidedly in one direction or the other. Higher stock prices will tend to put upward pressure on mortgage interest rates while falling stock prices will probably prove supportive of steady to fractionally lower mortgage interest rates.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
