Interest rates edge downward this week

Interest rates for buying a home on the Palos Verdes Peninsula edge downwardthis week.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“Now in the valley between the last and the next Federal Reserve meeting, financial markets must study and react to new inbound data about the economy and inflation. As such, mortgage and other interest rates will be pushed and pulled, fully dependent upon both individual items and the collective tenor of the mass.

Provided the needle doesn’t run very hot for very long (a happenstance we’ve not seen in a good long while) nor show the kind of weakness that could point to deflation or even an economic downturn, interest rates can really only run in a range, at times tending to the bottom of it, and at other times, more toward the top. Middling or mixed data will leave us, well, in the middle somewhere.

With no signal of acceleration to be seen of late, mortgage rates have settled back, edging closer to 2016 lows than not. To get them up off the floor, we will need to see a sustained period of warmer data, which would in turn engender an increasing likelihood of a Fed move in June. At the moment, there’s little to support this, but there is still rather a bit of time before all that data comes into focus.

Amidst a moderate economic backdrop, where can mortgage rates go? Actually, nowhere. As long as the data fail to reflect or suggest any economic acceleration there’s little reason to think that they will find any sustained upward motion. Moreover, the generally soft-to-moderate tenor of the data may suggest that that Fed will wait longer, and this in turn is the reason that we’ve seen a decline in mortgage rates in the days since the last Fed meeting.

The settling back of mortgage rates to about levels seen in the last “sweet spot” between Fed meetings will probably persist. The pattern of the last three Fed meetings suggests firming mortgage rates in advance and softening ones after the event, for at least a few weeks… before firming in advance of an upcoming meeting again. We’re on the downward side at the moment, but there is not much more space for them to fall at present, perhaps just a couple of basis points or so.

That’s what we think we’ll see next week. There’s a fairly light calendar of new data due out and some residual rate decline from Friday yet to be realized in the averages. Most likely, we’ll see a three or four basis point decline in HSH’s FRMI by the time the week comes to a close.”

The following are interest rate quotes from American California Financial: