Mortgage Rate Update December 3, 2015

Mortgage rates are slightly worse from Monday.

Yields here in the US are up across the board this morning in reaction to the much anticipated announcement from the European Central Bank (ECB).  I had written on Monday how monetary policy in the US and Europe are on the brink of diverging.  The US is about to embark on a tightening cycle while Europe is moving to loosen monetary policy.

In the aforementioned blog post I wrote how this was actually benefiting interest rates in the US because capital was flowing out of Europe and into the US improving demand for US dollar-denominated assets and driving yields lower.  So why are rates worsening today?

This is a perfect example of the old Wall Street saying ‘buy on the rumor and sell on the news’.  It turns out the ECB did loosen their monetary policy today but not by as much as had been rumored.  As a result, many of the trades that were made in anticipation of their announcement are now unwinding and rates in the US are moving back up.

Fed Chairwoman Janet Yellen is testifying in front of lawmakers in our nation’s capital as I type.  According to the live feed she is emphasizing that the Fed will raise rates slowly.  The markets remain fairly certain that the Fed will raise short-term rates at the next open market committee meeting scheduled for Dec. 15th-16th.  That reality is already priced into the mortgage rates you see today.

Tomorrow is the all-important jobs report.  The financial markets are expecting ~185,000 new jobs created in November.  There were 268,000 new jobs posted in October according to last month’s report.  Given the news out of Europe and the difficulty in handicapping this report I recommend locking.

Current Outlook: locking