Category: Swanson Home Loans Blog – Mortgage Rate Updates and More

Mortgage Rate Update September 21, 2015

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

Mortgage rates are back to the best levels for the year.

In case you missed it Thursday’s much anticipated Fed announcement was a boon for mortgage rates.  The Fed voted to leave short-term rates unchanged and made dovish comments about near-term monetary policy.

In the post-announcement press conference Chairwoman Janet Yellen voiced concerns about the health of the global economy and the potential impact on US inflation.  Inflation in the US remains below the Fed’s target of 2% and they would like to see prices rise consistently before they raise rates.

The next Fed meeting is October 27th-28th and the markets don’t believe the Fed will hike then either.

Fed Chances

The economic calendar is full of housing data this week.  Earlier today the National Association of Realtors released its monthly reading on existing home sales.  The number of home sales declined last month due to tighter inventories.  Let’s not forget that existing home sales hit an 8-year high in July so a miss in August is not a huge surprise.

On Tuesday the Federal Housing Finance Agency releases their version of the national Housing Price Index, on Thursday we’ll get a reading on new homes sales, and on Friday we’ll get consumer sentiment.

From a technical perspective I am concerned about the current level of rates.  Mortgage rates improved in a knee-jerk reaction following the Fed’s announcement last week.  I think we have more to lose than to gain so am recommending a locking position.

Current Outlook: locking

Mortgage Rate Update September 17, 2015

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

Mortgage rates had a rough day on Tuesday possibly in anticipation of today’s Fed meeting.  Mortgage rates are modestly worse relative to where we started the week.

Today’s Federal Open Market Committee meeting is the most anticipated one in recent history.  For the past seven years the Fed has left the Federal Funds rate near 0% in an ongoing effort to stimulate the economy out of the worst recession since the Great Depression.

The Fed will begin raising short-term interest rates but the question is, WHEN?.  The markets currently think there is a 21% chance that the Fed will begin raising interest rates today.  Even if they do not there is a 65% chance that the Fed will raise short-term interest rates by December.

Is a rate hike happening today or further down the road?
Is a rate hike happening today or further down the road?

It’s important to understand that the Fed does not directly control mortgage rates.  However, their actions and words can impact mortgage rates.  In addition to watching for any action on interest rates today it will be important to listen for any changes to the Fed’s forecast for the economy (short-term and long-term), whether or not there is a unanimous decision among Fed officials, and any clues as to how aggressively or gradually the Fed may raise rates in the future.

My guess is the Fed will not raise rates today.  It should be a very interesting day.  The Fed announcement is scheduled for 11AM PST followed by a press conference starting at 11:30AM PST.

Current Outlook: floating

Mortgage Rate Update September 14, 2015

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

Mortgage rates are more or less unchanged from last week.

Although there is nothing of significance being released today the rest of the week brings very significant economic data.  On Tuesday we’ll get a read on retails sales and industrial production.

On Wednesday, we’ll get the latest reading on the Consumer Price Index (CPI).  As I’ve written about extensively on this blog inflationary pressure is the last thing the Fed is waiting on before they start raising short-term interest rates.

The markets are waiting for Thursday's Fed statement. I anticipate some volatility following their comments.
The markets are waiting for Thursday’s Fed statement. I anticipate some volatility following their comments.

 

And speaking of the Fed, the major highlight of the week comes Thursday when they will release their latest monetary policy decision.  At this point it appears unlikely that the Fed will raise short-term interest rates at this meeting.  Let’s not forget that the Fed DOES NOT directly control mortgage rates.  Yet what they say and how they say it can influence the direction of longer-term interest rates.

I anticipate that the markets will trade sideways until Thursday and then we could see some volatility depending on what they elect to do.  I will remain in a floating stance.

Current Outlook: floating

Mortgage Rate Update September 10, 2015

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

Mortgage rates continue to trade sideways as the financial markets wait in anticipation of next week’s Fed meeting.

The outlook for the US stock market is growing bearish.  The S&P 500 hit bottom back in March of 2009 and since then it has created annualized returns of ~20%.  Is the party about to end?  Many market analysts are shifting their outlooks.  In today’s Wall Street Journal it was reported that one portfolio manager, who manages $650 billion of investments, has his customers in nearly 90% cash positions.

sp500 09-10-15B

David Tepper, a billionaire hedge fund manager, came out today and said, “…we’re talking about a market that should correct.”  He went on to comment that he would buy into the stock market only if stock market valuations declined by 20%.

Let’s keep in mind that no one knows with any level of certainty where the stock market is going to go next and at any given time there are a variety of opinions one can subscribe to.  That said, valuations do appear on the high side given the fact that China’s economy is struggling and the Fed is poised to begin raising short term interest rates.  If the stock market should enter into a bear market it should help mortgage rates.

Later today the US Treasury will auction $13 billion in 30-year bonds.  Over the past couple months the additional supply of long-term debt in the market has hurt mortgage rates so I wouldn’t be surprised to see yields rise modestly in the next 24 hours.  That said, I still think that borrowers can afford to float into next week.

Current Outlook: cautiously floating

Mortgage Rate Update September 8th, 2015

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

Mortgage rates are priced modestly worse today compared to late last week.

Global stock markets are off to the races this morning.  Markets in Asia and Europe are broadly higher and the US is following suit.  China reported that exports decreased by 5.5% last month which is better than the previous months reading of -8.8%.  It’s a case where bad news is actually good news.  US stocks were up ~1.5% in early trading.  Good news for stocks is often bad news for mortgage rates.

In case you missed it Friday’s all-important jobs report showed that the US economy added 173,000 new jobs in August.  This number was below expectations which you would initially assume would help mortgage rates.  However, the report also revised higher previously released figures for June & July.

In housing news, Corelogic reported that 469,000 homes in the US were in some form of foreclosure (1.2% of all housing stock).  This figure is down 28% from last July and shows that as home prices climb home loan delinquencies fall.

Source: Corelog
Source: Corelogic

The economic calendar is fairly light this week.  The US Treasury is scheduled to auction $24 billion in 3-year notes later today, $21 billion in 10-year notes tomorrow, and $13 billion in 30-year bonds on Thursday.  The fresh supply may make it difficult for rates to improve.

From a technical perspective mortgage rates are trading right at technical support.  I will recommend cautiously floating for now but lets not lose sight of the fact that mortgage rates are still very near 2015 lows.

Current Outlook: cautiously floating

Mortgage Rate Update September 3, 2015

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

Mortgage rates are basically unchanged for the week.  US interest are effectively being tugged higher by US domestic economic conditions while international storylines attempt to pull them lower.

The financial markets are eagerly awaiting tomorrow’s all-important jobs report.  Expectations are for ~+220,000 new jobs to be created.  Typically, if new job creations exceed expectations then we’d expect mortgage rates to worsen and vice versa.  Tomorrow we may see interest rates react to a lesser publicized indicator in the jobs report.  Average wage growth is of significant interest to the financial markets given the Fed’s position.

As I’ve previously written on ‘rate update’ if the Fed only monitored job creation chances are they would have hiked short-term interest rates by now since the labor market has been fairly strong.  However, the Fed also monitors inflationary stability and price pressure has been weak.  Analysts are watching to see is average hourly earnings are on the rise.  If so, that could signal wage-based inflation on the horizon which would likely prompt the Fed to raise rates.  If wages don’t grow then the Fed is more likely to hold out until a future meeting.

US interest rates are caught in a tug of war
US interest rates are caught in a tug of war

As analysts try and predict the Fed’s next move it is clear they are in very difficult space.  Domestically the US economy is solid and is probably ready for a modest hike.  However, international weakness may keep the Fed on hold.

Earlier today European Central Bank (ECB) president Mario Draghi announced that the ECB was prepared to further stimulate the EU economy with additional quantitative easing measures.  The EU’s largest economy is Germany which is heavily reliant on trade with China.  As we know China’s near-term economic outlook is less than strong.

The yield on the German 10-year government bund is .79%.  The yield on the US 10-year treasury note is 2.17%.  As long as rates for German debt remains low it will make it hard for US rates to increase too much.

Predicting tomorrow’s all-important jobs report is always difficult.  The safe play is to lock given that US interest rates remain attractive on a historical scale.  That said, I think tomorrow’s jobs report has a strong likelihood of coming in soft so I will recommend a floating bias.

Current Outlook: floating bias

Mortgage Rate Update August 31, 2015

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

Mortgage rates improved by ~.125% during the week of August 17th-21st and those improvements vanished last week as ongoing volatility rattled the markets.  I will not be surprised to see volatility continue this week because the week before Labor Day traditionally sees fewer traders in the office (and therefore fewer buyers and sellers).

Volatility concept

Over the weekend Fed vice-chair Stanley Fischer commented that, “I will not, and indeed cannot, tell you what decision the Fed will reach by Sept. 17th.”  Up until these comments the financial markets were leaning towards inaction on the part of the Fed when they meet in a couple weeks.  As financial market volatility and weakness in the Chinese economy persist one would think the Fed may place rate hikes on hold.  However, Fischer’s comments show the Fed is still seriously considering a rate hike.  The financial markets currently think there is a 28% chance the Fed will do so.

The economic calendar is jam packed with significant economic data this week.  Among the highlights are Unit Labor Costs (Wed.), the Fed’s Beige Book (Wed.), ADP jobs report (Wed.), Initial jobless claims (Thurs.), and the all-important jobs report (Fri.).  The markets are expecting ~220,000 new jobs created in August.

From a technical perspective the 200-day moving average looks as if it will keep rates from getting substantially better but there is room for modest improvement.  I think loan applicants have more to lose than to gain but there does not appear to be an imminent need to lock so I will maintain a neutral position for now.

Current Outlook: neutral

Mortgage Rate Update August 20, 2015

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

Housekeeping Note: ‘Rate Update’ will be on vacation next week and is set to return Monday, August 31st.

Mortgage rates are back at the best levels of 2015.

Mortgage rates improved following the release of the minutes from the last Fed monetary policy meeting.  The minutes revealed that Fed officials are divided as to whether or not they should raise short-term interest rates at the next meeting scheduled for September 16th-17th.

The difficulty the Fed finds themselves in has to do with the fact that job growth remains strong and unemployment is low yet inflationary pressure remains soft.

Stock markets around the globe are trading lower this morning on worries over global economic growth.  The Shanghai Composite dropped 3.4% earlier, France is down 1.4%, Germany is down 1.2%, and the US markets are opening up down ~1%.  Weakness in stocks is often a good sign for mortgage rates.

existing-home-sales-8-20-15

In housing news, the National Association of Realtors released the existing home sales report for July.  It showed that the number of completed sales in the US increased by 10.3% from a year earlier (5.59 million units on an annualized basis).  In the west median home prices were up 8.4% from a year earlier.

Technical trading patterns suggest that mortgage-backed bonds are overbought which is a signal rates may reverse higher.  I recommend locking in.

Current Outlook: locking

Mortgage Rate Update August 17, 2015

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

Mortgage rates are slightly better as compared to last Thursday.

Following last weeks announcement from the Chinese government that they would allow the Yuan to float more freely against the US dollar mortgage rates have improved by .125%-.25%.  The goal of the policy is to make Chinese goods & services more competitive in the global economy and spur economic growth.  Some analysts think the Yuan could decline by another 6%-10% which would surely hurt US based corporations.  It could also force the Fed to hold off on rate hikes.

Speaking of the Fed, we are exactly one month away from their next monetary policy statement.  The markets are currently assigning a 45% probability that they will raise short-term rates at the next meeting.  As I have written previously, if the Fed does raise short-term interest rates sooner rather than later it may actually help long-term interest rates (including mortgages) improve.

Slower than anticipated manufacturing activity is helping mortgage rates this morning.
Slower than anticipated manufacturing activity is helping mortgage rates this morning.

The economic calendar is fairly busy this week.  Earlier today the New York Federal Reserve Bank released its monthly report on manufacturing activity in that region.  It showed slower than expected activity and has the financial markets worried about a slowdown in the months ahead.  Bad news for the economy is often good news for mortgage rates.

The highlights for the rest of the week are housing starts (tomorrow), consumer price index (Wednesday), Fed meeting minutes (Wednesday), and existing home sales (Thursday).

Current Outlook: floating

Mortgage Rate Update August 13, 2015

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

Mortgage rates are effectively unchanged from Monday.

In a surprise move the Chinese Government devalued the Yuan on Tuesday in an effort to make their goods and services look more attractive to the global economy.  The move was unexpected and caused a short “flight-to-safety” in the financial markets which benefits US interest rates.  Furthermore, cheaper Chinese goods eases inflationary concerns which is positive for mortgage rates.

Earlier today US retail sales were reported for last month.  Overall the report was slightly better than analyst had expected.  Good news for the economy is often bad news for mortgage rates.

Later today the US Treasury will auction $16 billion in fresh 30-year bonds.  A positive response would be good for mortgage rates and vice versa.  Given that rates are near 3-month lows I recommend a locking bias.

Current Outlook: locking