The Federal Reserve board met this week and left interest rates alone, which was expected given the current economic reports.
A variety of factors influenced mortgage rates over the past week. Anticipation of the Fed statement, an improved outlook for European economic growth and reduced concerns about Greece, combined to cause mortgage rates to end the week higher.
The Fed statement released Wednesday contained no surprises. As expected, the Fed removed the last reference to a specific date regarding a federal funds rate hike. Going forward, Fed officials will decide at each meeting whether to raise rates based on the performance of the economy. Mortgage rates recovered some of their losses after the news.
Gross Domestic Product (GDP), the broadest measure of economic activity, increased at an annualized rate of just 0.2% during the first quarter, down from 2.2% during the fourth quarter. Unusually bad winter weather, port disruptions, lower energy prices and the stronger dollar were the major factors behind the weak first quarter figures. In recent years, GDP growth has been slowest in the first quarter, followed by better results for the rest of the year.
March Pending Home Sales increased for the third straight month to the highest level since June 2013. Pending sales were 11% higher than a year ago. Since this report measures signed contracts for the sale of existing homes, it is indicating continued improvement in future housing market activity.
Growth in household income has slowed and business investment's have also declined. The housing market remains slow (but improving) and export growth has dropped. Inflation rates have not increased as the Fed thought they might.
Low inflation rates usually mean low mortgage interest rates, so that is part of the reason rates have been low.
Mortgage rates varied slightly this week, but there was a little rebound after the Fed's report. We'll see how it looks over the next few days. Usually investors will dig a little deeper into the Fed's report and they may find something that changes their thoughts. There may be some economic reports that affect rates but for now, rates should stay in the same range that they have been.