US-China trade talks continue to influence mortgage rates

Happy Birthday to Ken Galbraith who would have turned 111 today.  The Canadian economist famously predicted in his 1958 book The Affluent Society that as society becomes more affluent private business would create additional consumer demand through marketing and consequently public goods (i.e. schools & parks) would be neglected.

Seems to me like he was on to something.

US-China Trade Talks

Trade negotiators from China and the US may be onto something too.

There are literally thousands of factors which can influence the direction of mortgage rates.  However, over the past few weeks one story line in particular has dominated.

Trade tensions between the US and China began flaring up in March of 2018.  Since then both sides have taken a tit for tat approach to trade policy.

Over the past few months trade negotiators from both countries have engaged in talks to try and resolve differences.   The financial markets have monitored the talks closely and sentiment has see-sawed accordingly.

When optimism rises that a trade deal will be reached mortgage rates worsen and when pessimism over a trade deal grows home loan rates tend to improve.

Following last weeks meeting between President Trump and China’s vice premier the financial markets are relatively optimistic that a trade agreement can be reached and therefore interest rates are currently cycling higher.

Will they continue to move higher?  Or will optimism wane and help rates cycle back lower?  Time will tell.


Similarly, news out of Brussels is that UK and European leaders are close to reaching a draft Brexit deal which may allow the UK to separate from the EU in an orderly fashion.

Interest rates in Europe are increasing on optimism over an orderly exit.

The week ahead

Although I expect mortgage rates to react to sentiment over US-China trade talks there are a few other story lines I’ll be following.  Third quarter earnings reports have started.  As the stockmarket reacts to the reports I expect interest rates to react accordingly (click HERE to learn how the stock market can influence mortgage rates).

Furthermore, we’ll get the latest reads on retail sales (Wednesday), housing starts & building permits (Thursday), and industrial production (Thursday).

I think rates may worsen in the coming days but I do think they will reverse course at some point.  For those who can wait I would recommend floating.

Current Outlook: neutral

Mortgage rates are better than fluffernutter!

What do you get when you add peanut butter to marshmallow?  Well if you add them to two pieces of bread you have yourself a fluffernutter sandwich and today is National Fluffernutter Day!  Never tried one but if I did I would probably add bacon.  Doesn’t that sound good?

Mortgage Rates

Home loan rates are good this week and are benefiting from a deterioration in US-China trade talks.  The two countries are scheduled to meet this week but on Monday the US Commerce Department added 28 Chinese companies to an export blacklist which will make an agreement all that much harder to achieve.


Last week’s all-important jobs report showed weaker than expected hiring.  Furthermore, a reading of service sector activity also showed weaker than anticipated results. Earlier today, the head of the International Monetary Fund warned that, “the global economy is now in a synchronized slowdown.

Bad news for the economy tends to be good news for mortgage rates.

Federal Reserve

We may learn more about the Fed’s economic outlook on Wednesday when the minutes from their last monetary policy meeting are released.  The financial markets currently think there is an 80% probability that the Fed will cut again at the next meeting scheduled for October 30th.


The economic calendar is relatively light this week which means mortgage rates will likely respond to technical trading patterns and sentiment surrounding US-China trade relations.

Mortgage-backed bonds are currently trading at an important technical layer.  If bond prices can rally and close above this level then it would be a positive signal for rates.  However, if bonds sell-off then it’s likely rates will trend higher the remainder of the week.

Current Outlook: cautiously floating

Mortgage rates worsen in September, what’s in store for October?

I apologize for the absence of ‘rate update’ during the month of September.  I could give you a list of excuses including 40th birthday celebration, loan volume, rainy weather, washing my hair, etc.

But the bottom line is I allowed things to get in my way.  Back on track in October….

Mortgage Rates

The month of September was not kind to mortgage rates.  After reaching multi-year lows at the end of August home loan rates increased by .125%-.375% during the month of September.

The fact that mortgage rates increased during a month when the Federal Reserve cut short-term interest rates has created some confusion amongst consumers.

Bank of Japan

For the past two decades the central bank in Japan has orchestrated “loose” monetary policy in an effort to keep interest rates low and promote economic growth.  Low interest rates overseas helps keep a lid on rates rising in the US.

Yesterday, the Bank of Japan announced they would be less accommodating in the future signaling that they’d like to see long-term interest rates move higher.  This is not a positive sign for US mortgage rates.


We are now 30 days from the scheduled Brexit and an agreement between Britain and the EU remains elusive.  A disorderly exit may help US interest rates improve but there is still time for an agreement to be reached.


This week’s economic calendar is highlighted with the monthly jobs report due out Friday.  Technical trading patterns suggest floating for now.

Current Outlook: floating bias

Home price gains moderate while mortgage rates improve

Every Tuesday I try to explain what is happening in the financial markets that will impact mortgage rates.  The truth is sometimes I highlight factors that do influence interest rates and sometimes I don’t.  Sometimes mortgage rates fluctuate……just because.

Today is National Just Because Day so if there is something you’ve been wanting to do but never done it.  Well…. today is your day.

Mortgage Rates

Two weeks ago I highlighted the divide between fixed mortgage rates and the yield on the US 10-year treasury.  At that time the 10-year treasury yield had fallen by .40% while mortgage rates had only improved by .25%.

As I had expected and hoped, that spread tightened this week as mortgage rates have improved by ~.25% and the 10-year treasury yield has only improved by ~.125%.

Home Prices

The S&P Case Shiller Home Price Index report was released earlier today and showed that home price appreciation slowed in June to +3.1% nationwide (down from +3.4% the prior month).  In Portland home price gains remained at +2.4% year-over-year which is unchanged from the previous month.

Home Prices during recessions

As the US yield curve continues to invert the media is growing more focused on the possibility of a recession in 2020.  Some prospective home buyers are assuming that if a recession does take place that home prices will fall.

However, it’s important to note that prior to the most recent economic recession, which was primarily caused by speculation in housing, home prices in the Portland-metro region actually increased during economic slowdowns.

Therefore, if a consumer is planning to wait for home prices to drop they may be disappointed.


The remainder of the economic calendar this week is light and we expect trading volumes to be low as we head into Labor Day weekend.  Momentum remains on our side so I will maintain a floating bias.

Current Outlook: floating bias

Global yields may help US mortgage rates improve

Global connectedness made a major advancement on this day in 1911 when the New York Times sent the first around the world telegram.

The telegram which simply read, “This message sent around the world” left the New York Times newsroom at 7pm and arrived back in 17 minutes after being relayed via San Francisco, the Philippines, Hong Kong, Saigon, Singapore, Bombay, Malta, Lisbon, and the Azores.  Read below to learn how global connectedness is influencing the direction of mortgage rates.

Mortgage rates sideways

After home loan rates improved by ~.25% at the beginning of August they have essentially flattened out for the past two weeks oscillating within a .125% range.

Mortgage rates improved at the tail end of last week but increased over this past weekend.

In the near term it seems like we may see more sideways movement.  However, the longer-term outlook still looks positive for borrowers.

International Pressure

Presently much of the developed world has interest rates which are lower than here in the US.  The Central Bank equivalent target interest rate is 0% or less in the Eurozone, Denmark, Switzerland, Sweden, and Japan.

There is currently $16.7 trillion in negatively yielding government bonds.

As a reminder, the Fed currently has the Fed Funds rate target at 5.25% and our 2-year through 30 year bonds are yielding between 2-3%.  Think that is high?  At least we’re not in Argentina where the central bank target rate is 58%!!!

Although US interest rates are not likely to go straight down I do think lower yields in other countries will put downward pressure on our interest rates in the months to come.  If a borrower can afford to be patient it probably makes sense to do so.

Jackson Hole

Speaking of central banks, global bankers are meeting this weekend in Jackson Hole, Wyoming for the annual economic symposium.  Fed Chairman Jerome Powell is scheduled to deliver a speech on Friday in which many analysts think he will indicate another Fed rate cut later this year.


Mortgage rates may increase in the near-term is we see US stocks rally again.  However, my longer-term outlook remains unchanged.  For borrowers who remain patient in I think it makes sense to float.

Current Outlook: floating bias

Divide between 10-year treasury and mortgage rates grows

On this day in 1961 East German Soldiers began laying barbed wire and bricks in downtown Berlin.

Over the course of the next 12 years the Berlin Wall was constructed.  The 96-mile long wall made of concrete blocks and barbed wire was meant to divide Soviet controlled east Berlin from US-allied West Berlin.

Speaking of divisions we are seeing a divide growing between mortgage rates and the US 10-year treasury note.

10-Year Treasury Note & mortgage rates

Since August 1st the yield on the US 10-year treasury note has fallen by .40% (from 2.05% to 1.65%).  Normally we’d expect to see 30-year fixed mortgage rates improve by .25%-.375% when the 10-year treasury yield improves this much.

However, since August 1st mortgage rates have only improved by .125%.  The spread between the US 10-year treasury yield and fixed mortgage rates is wider than normal and I expect either mortgage rates to improve further or the yield on the treasury to rise so that the spread normalizes.

Yield Curve

Speaking of the US 10-year treasury note… it is yielding 1.68% as of this morning.  The yield on the US 2-year treasury note is trading at 1.65%.  Should the yield on the 2-year treasury note exceed the 10-year yield then you will definitely hear about it from the media.

The yield curve has not been inverted since 2007.  Going back 40 years every time the yield curve has inverted (1978-1982, 1989-1990, 2000-2001, and 2006-2007) a recession has followed (1981-1982, 1990-1991, 2001, 2008-2009).


Although the most recent economic recession was tough on housing (or was housing touch on the recession?) previous recessions were not.

In fact, during the 1981, 1990, and 2001 economic slowdowns the S&P Case Shiller home price index actually rose during that time.  Therefore, if you are a prospective homebuyer and think homes will get cheaper in the near-term I wouldn’t hold my breath.


I still think (and am hopeful) home loan rates will improve as the spread between the US 10-year treasury yield and mortgage rates tighten.  I will remain in a floating position.

Current Outlook: floating bias

Mortgage rates continue to trend lower

It would be glamorous to be reincarnated as a great big ring on Liz Taylor’s finger.”- Andy Warhol

Happy birthday to Andy who would have been 91 today.

Interest Rates

We’ve held a “floating” position for some now and it’s paid off.  Mortgage rates are at their best levels in over three years and some analysts are calling for them to continue to trend lower.

10-Year Treasury Note

The yield on the US 10-year treasury note, which mortgage rates tend to track, has fallen from 2.05%  to 1.75% in the past 5 days.  Over that time mortgage rates have improved by .125%.  I won’t be surprised if mortgage rates improve by another .125% over the next couple weeks.

Yield Curve

With yields falling for longer duration bonds we are back in a scenario where the yield curve is inverted.  Many economists think an inverted yield curve is a signal of an impending economic recession but there are never any guarantees.

China Trade Tensions

Concern over trade tensions pushed US stocks sharply lower on Monday.  At the moment it appears that the US and China are a long ways from solving their trade disputes.  This is not favorable for near-term economic growth but favorable for US interest rates.


From a technical perspective mortgage rates are benefiting from momentum.  We could see rates go up later this week but I still believe we are in store for lower rates in the coming months.

Current Outlook: floating bias


Mortgage rates slightly improved

Feeling busy and anxious about all the things you have to get done?

Just remember, “stressed” spelled backwards is “dessert” and today is National Vanilla Ice Cream Day!

Interest Rates

Home loan rates have improved modestly from last week.

Existing Home Sales

The National Association of Realtors released figures earlier today which showed that the number of existing home sales slid 2.2% in May compared to a year earlier.  Despite low mortgage rates and a strong labor market a lack of housing supply is causing the number of units sales to decline.

Home Prices

According to the aforementioned report the median home price in the US increased for the 88th consecutive month.  A median priced home increased by 4.3% compared to a year earlier and is at historic highs.

The Fed

The Fed is scheduled to meet next week and is widely expected to cut short-term interest rates.  The markets are currently predicting a .25% cut but some think the Fed may come up and slash rates by .50%.

This rate cut is already baked into the rates consumers see today.  As a reminder, the Fed does not directly set mortgage rates.


From a technical perspective mortgage-backed bonds have some room to rally which would help interest rates improve.

The remainder of this week’s economic calendar is relatively quiet.

Current Outlook: floating bias

Mortgage rates back off of historical lows as economic outlook is mixed

You can file this one in the “wish I had reason to celebrate” folder.  Today is #NationalPersonalChefDay!  Don’t forget to pat your chef on the back and thank them for all their hard work.

Interest Rates

Mortgage rates are unchanged this week after increasing by ~.125% last week.

Recession looming?

The US economy is currently in the longest economic expansion in modern history.  It started back in 2009 and has been in tact for 121 months.  Naturally, all good things must come to an end and as this growth pattern grows long in the tooth more and more economists will begin to predict a near-term recession.

Earlier today an index that tracks global freight movement was released and showed seven straight months of contraction.  According to the report the US economy is, “signaling economic contraction.”

I am not sure how reliable this indicator is but if the US economy does move towards economic contraction one would think that US mortgage rates would improve.

Or not…..

Earlier today the monthly retail sales report showed stronger than expected consumer activity.  Furthermore, an index which gauges homebuilders’ confidence also came in higher than anticipated.

The rest of the week

The remainder of the week features Fed Chairman Jerome Powell speaking (later today), housing starts/ building permits (Wednesday), and leading economic indicators (Thursday).


In the near term mortgage rates are testing important technical layers.  I expect mortgage rates to be at these levels or possibly even higher in the next 3-7 days.  Beyond that I think mortgage rates will come back down.

Current Outlook: floating bias

Rates modestly worse but long-term trend in tact

Congratulations to the US Women’s soccer team who capped a dominating performance on Sunday by winning the World Cup.  The US recorded 26 goals during their seven games in the World Cup and only gave up 3!

Interest Rates

Mortgage rates are modestly worse to start the week after the Bureau of Labor Statistics released a stronger than expected employment report on Friday.

Jobs Report

The all-important jobs report showed that 224,000 new jobs were created during the month of June and eased recession concerns.  Yields increased modestly following the release.

Home Loan Performance

A strong labor market and healthy home price appreciation is creating conditions for low delinquency.  CoreLogic’s monthly Home Loan Performance Insights Report was released earlier today and shows delinquency is currently at a 20-year low across the US!  It’s hard to imagine a housing crash is on the horizon given that statistic.

The Fed Speaks

Fed Chairman Jerome Powell is scheduled to speak Wednesday and Thursday this week.  The Fed’s Open Market Committee is scheduled to meet July 31st and there is currently only a 5% probability that the Fed will cut rates at that time (the markets assign a 60% chance of a cut at the Sept. 18th meeting).

The minutes from the last Fed meeting are also scheduled to be released on Wednesday.  Should his comments or the minutes alter the outlook for a rate cut it could cause some volatility in the financial markets.

The rest of the week

Aside from Fed speak we’ll be watching the Consumer Price Index scheduled for release on Thursday and the Producer Price Index on Friday.  Hotter than expected inflation could put upward pressure on rates.

The long-term trend remains in our favor so will remain in a floating stance.

Current Outlook: floating