Mortgage Rate Update January 14, 2016

Mortgage rates are essentially unchanged from the beginning of the week and remain at 2-month lows.

As I have repeatedly written over the past few months the Fed does not directly control mortgage rates.  In mid-December the Fed increased short-term interest rates by +.25%.  Since then mortgage rates have improved by ~-.25%.  There you have it.

With an assist to Art Cashin, I want to take a moment to focus on the stock market.  As we know, when stocks do poorly mortgage rates tend to benefit and vice versa.  Below is a chart of the S&P 500 for the past 6 months.

As you can see the S&P 500 has experienced two 10% corrections in the past six months.  In the past 100 years this has only happened three other times.  The other three occurrences took place in 1929, 2000, and 2008.  Do you need a reminder on how those years turned out for the stock market?  Of course there is no guarantee that history will repeat itself but this is certainly a concerning prospect.

From a technical perspective mortgage rates appear ripe for reversal.  I am going to recommend a locking position.

Current Outlook: cautiously floating