Author: Evan

My blog is a tool for me to provide updates on what is happening in the financial markets that will impact mortgage rates, update professional partners on what is happening in the mortgage industry, and write about general financially related topics.

Mortgage Rate Update June 27, 2016

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

Unless you live under a rock you are aware of the outcome of Britain’s vote on Thursday last week.  The ripple effect of “Brexit” continues to reverberate through the markets this morning and US interest rates are benefiting.

The S&P 500 is off 5.4% from Thursday and the yield on the US 10-year treasury has fallen from ~1.8% on Thursday down to ~1.45% today.  Mortgage rates tend to track changes to the US 10-year treasury yield.

Portland OR Mortgage Rates SP500

Although Britain is only the 7th largest trading partner for the US a “Brexit” is causing the US dollar to strengthen which will likely drag down economic growth.

Looking ahead the economic calendar for the week gets busy starting tomorrow with GDP and the Case Shiller Home Price Index report.  On Wednesday we’ll get the most recent inflation figures.  For now we’ll continue to float and see if rates improve further.

Current Outlook: floating

Mortgage Rate Update June 23, 2016

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

After hitting 3-year low levels a week and a half ago mortgage rates have risen by ~.125%.  Essentially mortgage rates have correlated perfectly with sentiment surrounding the British vote on whether to remain or separate from the European Union.

The polls are currently open as British citizens cast their votes.  Odds makers are currently saying there is a 70% chance Britain will remain in the EU and 30% chance a “Brexit” takes place.  Election laws in Britain prohibit publicizing early results so we will not know until all the polls have closed later today.

Britain's referendum on whether or not to remain in the EU is taking place today and will likely shape the direction of mortgage rates.
Britain’s referendum on whether or not to remain in the EU is taking place today and will likely shape the direction of mortgage rates.

Given the uncertainty surrounding a potential “Brexit” US mortgage rates have benefited recently when sentiment has shifted towards that outcome.  Therefore, intuition would tell us that if Britain stays in the EU mortgage rates may rise.  However, over the past week US mortgage rates have worsened by ~.125% so it is my belief that the status quo is priced in.

The British vote is overshadowing all other economic news at this point.  Although I think the outcome of the referendum will be that Britain remains in the EU I think we can float our interest rates.

Current Outlook: floating

Mortgage Rate Update June 20, 2016

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

Mortgage rates are essentially unchanged at multi-year low levels.

In-out-in-out-in-out…..A week ago I wrote (HERE) about how a poll released over the weekend had indicated a majority of British citizens favoring a “Brexit” from the European Union (EU) and how that helped mortgages rates in the US because of general uncertainty and a “flight-to-safety”.

Brexit. In or Out

This week a new poll shows that a majority of voters now favor remaining in the EU.  As a result, pricing on mortgage rates worsened very modestly this morning.  The bottom line is that Thursday’s vote is up in the air.  Here in the US we will learn the results after the markets closes on Thursday so to play it safe borrowers may want to lock ahead of that.  If Britain does depart the EU I expect mortgage rates to remain low and maybe even improve further.

The vote in Britain will overshadow other economic news stories this week.  The economic calendar is light in terms of the number of events but heavy in housing related reports.  On Wednesday we’ll see existing home sales, the FHFA housing price index report, and on Thursday we’ll get new home sales.  Recent housing reports have been “Goldilocks” meaning not too hot and not too cold.

Its very difficult to handicap the vote in Britain so I will favor a locking bias.

Current Outlook: locking

Mortgage Rate Update June 16, 2016

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

Mortgage rates remain at multi-year lows.

Below is a chart of the yield on the US 10-year treasury yield from 2014-current.  As you can see the current yield at 1.55% is the lowest going back that far.  Mortgage rates tend to track the direction on the US 10-year treasury yield.

Portland OR mortgage rates june 16 16

Why are rates so low?  There is currently a lot of uncertainty in the financial markets.  One week from today British voters will take to the polls and decide whether or not to remain in the European Union or exit.  There are many unanswered questions if they do leave.  Financial markets do not like uncertainty and as a result mortgage rates have declined on a “flight-to-safety”.

Central Banks around the globe are also contributing to uncertainty.  Earlier today the Bank of Japan left their aggressive monetary policy in place.  Many analysts had predicted that the Bank of Japan would implement additional measures to help stimulate the Japanese economy so the inaction caught the global financial markets by surprise.

Not surprising was the US Federal Reserve leaving short-term interest rates unchanged yesterday.  In the post-meeting press conference Fed Chairwoman Janet Yellen stated, “We are quite uncertain about where rates are heading in the longer term.”  Only a few weeks ago the Fed had set expectations for further rate hikes in 2016.  Now that is getting called into question.

From a technical perspective momentum remains on our side.  I will maintain a floating bias.

Current Outlook: floating

Mortgage Rate Update June 13, 2016

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

Mortgage rates remain at multi-year lows.

 

Britain’s referendum to exit the Eurozone or remain is scheduled for June 23rd.  This vote has been scheduled for many months but has flown under the radar here in the US because most of the polling has suggested a likelihood for the status quo.

However, this past Friday a fresh poll was released that showed a majority of Brit’s opting to “Brexit” the Eurozone (EU).  How might this impact US mortgage rates?

Britain's vote on June 23rd is likely to influence mortgage rates here in the US.
Britain’s vote on June 23rd is likely to influence mortgage rates here in the US.

Should Britain depart the EU it makes the possibility of other members exiting more likely.  For example, apparently Netherlands has already formed a coalition of citizens who would like to push for a “Nexit”.  The bottom line is that a “Brexit” will cause uncertainty and likely pressure mortgage rates lower in the near terms due to a “flight-to-safety” on the part of investors.

The economic calendar is fairly full this week.  The Fed is scheduled to meet tomorrow and Wednesday.  Following May’s weak employment report there is virtually no chance the Fed will raise short-term interest rates.  However, their comments can always move the markets.

We’ll also get more current readings on retail sales, inflation, manufacturing, and housing construction.

I recommend floating for now.

Current Outlook: floating

Mortgage Rate Update June 9, 2016

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

Mortgage rates remain at multi-year lows.

There is no shortage of fear in the marketplace about interest rates rising as a result of the Fed hiking short-term interest rates.  I overheard a conversation yesterday in which a real estate professional was advising a prospective homebuyer to buy a home sooner rather than later because mortgage rates were almost certain to be higher in the future.

It is true that mortgage rates may be higher a year from now but Fed rate hikes will not be the primary cause.  The Fed does not directly set mortgage rates.  Case in point:  The Fed last hiked short term interest rates in December 2015 and mortgage rates are presently ~.375% lower than then.  The yield on the US 10-year treasury yield has decreased by ~.50%.

source: mbshighway.com
source: mbshighway.com

Equally as feared is that home prices will fall since they have been on a such a rapid ascent.  CoreLogic released its most recent Home Price Insights report earlier in the weak.  The report showed that home prices in Oregon increased by 10.3% in the past 12 months.  Furthermore, the report forecasts that in the next 12 months home prices will increase by 7.4%.  You can download the report HERE.

From a technical perspective momentum in the interest rate markets are working in our favor.  I will shift to a floating position.

Current Outlook: floating

Mortgage Rate Update June 6, 2016

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

Mortgage rates have reverted to the best levels in three years following Friday’s all-important jobs report.

The markets were expecting Friday’s jobs report to show 155,000 new jobs created.  However, it showed that only 38,000 were added to the US economy in May. This is the weakest output in five years.  Bad news for the economy is good news for interest rates.  Speaking today, Fed chairwoman Janet Yellen communicated that a June rate hike was less probable.  According to CME Group there is currently a 6% chance the Fed hikes short-term interest rates in June.

Jobs-Report6-3-2016

This week’s economic calendar is pretty light.  Therefore, I expect mortgage rates to react to technical trading patterns and the stock market.

From a technical perspective mortgage rates are as good as they’ve been for 3 years.  I think borrowers have more to lose than to gain by not locking in at these levels.

US stocks have already recovered from Friday’s losses as investors forecast how lower interest rates will impact future corporate earnings.

I will maintain a locking bias.

Current Outlook: locking

Mortgage Rate Update June 2, 2016

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

Mortgage rates are unchanged.

Tomorrow the all-important jobs report will be released for the month of May.  During normal times this report is the most impactful release and currently it is even more amplified.  Why?

The Fed has been candid in their desire to hike short-term interest rates.  However, in order to do so they need reasonably strong employment figures for justification.  Inconveniently for them job growth in 2016 has been relatively modest.  The US economy has not created more than 250,000 new jobs in a given month since December.

Jobs report5-6-2016-portland-or-mortgage-rates

Current expectations for tomorrow’s report is that it will show +155,000 new jobs.  As always, if the report shows a figure greater than expectations we’d expect mortgage rates to worsen and vice versa.

All other economic news is overshadowed by the jobs report so we are solely focused on this event.  Given that mortgage rates are presently very near 3-year lows I think borrowers have more to lose than to gain so will recommend locking in today.

Current Outlook: locking

Mortgage Rate Update May 31, 2016

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

Mortgage rates are unchanged from last week.

Let’s start off with some housing news.  The S&P Case Shiller Home Price index report was released earlier today and for the 6th straight month Portland led the nation in year-over-year appreciation coming in at 12.3%.  Tight inventory continues to push prices higher.

Source: S&P Case-Shiller
Source: S&P Case-Shiller

In a separate report released by the Commerce Department inflationary pressure, as measured by the Personal Consumption Expenditure (PCE) index, remains fairly tepid.  The PCE price index, which is the Fed’s favorite gauge of inflation, increased 1.1% year-over-year.  This marks the 48th straight month that annual inflation has been below the Fed’s target of 2%.  One would think that the Fed would be less likely to hike rates given that price pressure is so low.

Looking ahead for the remainder of this holiday shortened week the economic calendar is full and concludes with the all-important jobs report this Friday.  From a technical perspective conditions in the interest rate market look favorable.  I am going to recommend floating for now.

Current Outlook: floating

Mortgage Rate Update May 26, 2016

Posted on by Evan in Rate Update

Mortgage rates are basically unchanged from the beginning of the week.

With regard to interest rates nothing major to report thus far in the week.  The media continues to speculate that the Fed will raise short-term interest rates in June but I don’t expect they will unless the June 3rd jobs report is very strong.

One interesting item to watch is the difference between shorter duration interest rates and longer-term rates.  Below is a chart showing that the yield on the US 2-year treasury and 10-year treasury notes have been converging (the spread is tightening).

portland or mortgage rates treas spread
Source: Wall Street Journal

Traditionally this has been an early indicator of an upcoming economic slowdown.  This signal is not 100% accurate but it is something to keep an eye on.  Keep in mind that bad news for the economy tends to be good news for mortgage rates.

I don’t see a catalyst for mortgage rates to worsen so I am going to recommend floating over the weekend.

Current Outlook: neutral