Mortgage Rate Update November 30, 2015

Mortgage rates are slightly improved from last week.

Mortgage rates are benefiting from the projected divergence in monetary policy between the US and Europe.  Here in the US the Fed is likely to raise the Federal Funds rate at their next meeting scheduled for mid-December.  Meanwhile, speculation across the Atlantic is that the European Central Bank will move to further loosen monetary policy as soon as this Thursday.

When central banks loosen monetary policy, as Europe is expected to do, it effectively adds to the money supply and devalues the currency.  Conversely, when central banks tighten monetary policy, as the US is expected to do, it reduces the money supply and adds relative value to the currency.  Therefore, we are seeing investment capital flow into the US in anticipation of these moves and that is driving yields down slightly.

In housing news, the National Association of Realtors reported that pending home sales rose by less than expected in October.  That said, the headline number is somewhat misleading because they also revised September’s previously released number up and without that adjustment the increase in pending sales would have been in line with expectations.

This week’s economic calendar is packed with significant data points.  The most attention will be focused on this Friday’s all-important jobs report.  Market expectations are for ~185,000 new jobs created last month and a number in line or better than expectations would cement expectations for a Fed rate hike in mid-December.  A severe miss in the new jobs number would definitely cause uncertainty in the financial markets.

Current Outlook: locking bias