Mortgage Rate Update October 23, 2017

For the 113th time my beloved Seattle Mariners will not take part in the World Series which starts this week and features the Los Angeles Dodgers versus the Houston Astros.  My money (I don’t actually wager) is on the Dodgers who have only lost once this post-season and have scored 48 runs while giving up only 19.

Mortgage rates are looking to dodge the fate they suffered last week when the stock market caught fire and pushed yields higher.  The culprit?  The Senate passed a budget proposal which allows for a $1.5 trillion reduction to revenue over the next decade.  Analysts agree that the $1.5 trillion exception is designed to allow for a major tax overhaul which is rumored to be in the works.  Should a major tax plan pass it would likely drive stock prices higher along with interest rates.

Technical trading patterns will play a pivotal role for mortgage rates this week.  As the chart below shows the yield on the US 10-year treasury note, which mortgage rates tend to track, is currently at ~2.40%.  The last four times yields hit this level interest rates reversed and move lower.

However, this time the fiscal and monetary conditions are different.  Should yields continue to rise I expect mortgage rates to move another .25% higher before stabilizing.

This week’s economic calendar will deliver fresh housing data.  On Wednesday we’ll get the latest reading on new home sales and the FHFA home price index.  On Thursday we’ll get the latest reading of pending home sales from the National Association of Realtors.  We expect recent storms to distort the results so the significance of these reports may be low.

Current Outlook: locking