My Opinion on Mortgage Rates

Despite concerns about rising rates and relying on my previous readings about Monetary Policy, I can comfortably state that the Fed had used five variations of “extended period” language to restrain expectations of policy rate hikes, eventually suggesting that it would maintain its low policy rate until at least mid-2015.

Low rates are appropriate for as long as the unemployment rate is above 6.5 percent, medium-term inflation forecasts stayed below2.5 percent, and long-run inflation expectations remained anchored.

I think that the recent signaling by the Fed Chairman is a market test and has not been understood properly and I think that mortgage rates are being pushed higher only because of market volatility .

There is little room to believe that the  US mortgage rates wil go higher than 5% for a significant period of time or that the Fed can slow down its QE (quantitave easing)  in light of the Massive Japan QE over the next two years  even if the Japanese QE is mainly aimed at expanding bank reserves rather than easing credit market conditions.

Rates will head to the low to mid 4’s during volatile periods with significant  periods in the mid to high 3’s still until 2015.

An active management of pricing margins is even more crucial in the upcoming couple of years .

Nabil Farhat