Mortgage Rate Update May 2, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates are unchanged from the latter half of last week.

Long-term interest rates, including mortgage rates, are inversely correlated to inflation.  This is because inflation essentially chips away at the return earned by lenders.  Inflationary pressure has been meek over the past few years as wages have been stagnant and commodity prices, including oil, have been low.  Is that beginning to change?

Strong gains in oil prices and a healthy labor market could lead to higher mortgage rates down the road.
Strong gains in oil prices and a healthy labor market could lead to higher mortgage rates down the road.

Oil prices have risen ~70% since the beginning of the year and as we know the labor market has been producing jobs at a healthy clip which should eventually create wage pressure that can lead to inflation.  We will learn more about wages when the all-important jobs report is released on Friday.  Recent weekly jobless claim releases suggest that this Friday’s report should be strong.  If the current trend continues we’ll need to be cautious about inflationary pressure and therefore mortgage rates.

In the near term the technical trading signals in the interest rate markets look favorable.  I am going to start the week with a floating bias but I anticipate shifting to a locking stance on Thursday before Friday’s jobs report is released.

Current Outlook: floating