The “recession is very likely over,” announced Fed Chair Ben Bernanke last week.
While this may be technically true, markets did not react with the usual leap upward in interest rates.
Instead, mortgage rates continued their very slow downward decent. While we may finally be in a period of economic growth, we may be far from a reasonable economic recovery. As long as unemployment remains elevated, we may see inflationary pressures held in check. This combined with a slow unwinding of
federal intervention in financial markets may lead to a lengthy period of low rates. However, markets
may react with rapidly increasing rates if significantly better-than-expected data is released, or if
rumors of termination of certain government programs circulate.
The direction that mortgage rates move this week is very likely to be dependent on the Fed’s policy
announcement on Wednesday. If the Fed issues any surprises for the market, such as the termination
of any support programs, we could see rates rise. Otherwise, they should stay fairly level.