Category: Rate Update

Mortgage Rate Update September 18, 2017

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

This week in 1973 Billie Jean King defeated former number 1 ranked Bobby Riggs in a tennis match which was publicized as the “Battle of the Sexes”.  Over 50 million television viewers watched the event.  The prior year King was the first woman to be named “Sportsperson of the Year” by Sports Illustrated.

This week the first woman to chair the Federal Reserve will deliver a very important speech following a regularly scheduled monetary policy meeting.  As I’ve written many times the Fed is about to embark on an unwinding of the monetary stimulus they injected into the economy in the wake of the financial crisis.

The Fed is currently in uncharted territory and analysts disagree over the impact of such a move.  Mechanically the Fed will simply allow bonds on their balance sheet to mature without replacing them.

Even without expanding their balance sheet the Fed has remained the highest volume buyer since quantitative easing ended.  The concern is that when the Fed withdraws their level of demand from the market interest rates will have to increase in order to attract buyers.  The degree by which interest rates rise is a matter of debate.

What all parties do agree on is that mortgage rates are very unlikely to improve from these levels as a result of this development.

We shifted to a locking bias two weeks ago and that move has paid off.  I will remain in a locking stance.

Current Outlook: locking

Mortgage Rate Update September 11, 2017

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

We wish all of those people dealing with Hurricane Irma a safe passage and rapid recovery.  You can CLICK THIS LINK to see some amazing footage of the storm as it appears from space.

Although the hurricane is expected to cause billions of dollars in damage it appears as though the destruction will not be as bad as originally feared.  This is positive for the US stock market, which is trading higher this morning, and negative news for interest rates.

Mortgage rates are unchanged from the beginning of last week.  Looking over a longer period, Interest rates have improved significantly since the middle of March when interest rates hit recent highs.  From a technical perspective I am concerned that we are in store for a reversal higher.  I think it is a good time to lock in.

This week’s economic calendar is relatively light.  The highlights come on Thursday when we get the Consumer Price Index and Friday when we get Retail Sales/ Consumer Sentiment.

I am going to recommend locking at this time.

Current Outlook: locking

Mortgage Rate Update September 5, 2017

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

According to the calendar summer has passed.  From a meteorological perspective autumn began on September 1st in the Northern Hemisphere.  However, judging from the temperatures outside it feels like summer remains here in Portland.

What also remains are low interest rates.  Mortgage rates improved modestly last week  and are firmly at 2017 lows.

As I wrote about last Monday (HERE) the US 10-year treasury note has successfully closed below the important technical level of 2.18% (currently at 2.08%).  The last time interest rates were this attractive was during the days following the election in November 2016.

Last week two economic reports in particular helped mortgage rates improve.  First, lower than expected inflation data from the Commerce Department called into question the Fed’s plans for continued tightening.  According to CME Group there is only a 36% probability that the Fed will hike short-term interest rates again this year.  Previously the probability had been greater than 50%.

Second, Friday’s all-important jobs report showed weaker than expected job creation for the month of August.  Bad news for the economy is often good news for mortgage rates.

Also contributing to low interest rates is a “flight to safety” in the financial markets.  Investors are reacting to news out of North Korea that a nuclear firearm was successfully tested over the weekend and that further tests are planned for the coming days.  Anytime geopolitical tension rises interest rates tend to improve.

This week’s economic calendar is relatively light.  I expect sentiment regarding the North Korean missile situation will drive action in the financial markets.  If tension wanes we could see interest rates worsen and vice versa.

Current Outlook: floating

Mortgage Rate Update August 28, 2017

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

Housekeeping: ‘Rate update’ will be taking a break from laboring one week from today.  In honor of Labor Day here is a quote from Robert Orben: “every day I get up and look through the Forbes list of the richest people in America. If I’m not there, I go to work.”

My thoughts and prayers go out to all those affected by the devastating impact of Hurricane Harvey.  I wish those who lie in the storm’s wake a safe next few days and rapid recovery.

This week appears to be a pivotal one in terms of the direction of mortgage rates.  Since the beginning of July interest rates have improved and mortgage rates are currently at the best levels of the year.

However, the yield on the US 10-year treasury note has idled at the 2.18% level over the past week.  Given the amount of significant economic data due out this week I think interest rates will make a decisive move higher or lower in the coming days.

On Tuesday we’ll get the latest reading of the Case Shiller Home Price Index report.  On Thursday we’ll get a reading on personal income and pending home sales.  Finally, on Friday we’ll get the all-important jobs report, manufacturing activity, and consumer sentiment.

For now I will maintain a floating position but have grown concerned that this trend lower has run out of steam.

Current Outlook: floating

Mortgage Rate Update August 21, 2017

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

In case you forgot to “planet” and missed the solar eclipse you can view live feeds HERE, HERE, and HERE.

As the path of the eclipse trends east and south across the United States interest rates are following a similar path.   Below is a graph of the yield on the US 10-year treasury note dating back to the beginning of July.

Over that time the yield on the US 10-year treasury note has improved by ~.20% while mortgage rates have improved by .125%-.25%.  I don’t expect this trend to last forever but momentum remains favorable for now.

Should the yield break below and close under 2.18% that would be a very good sign for rates to improve further.  However, if 2.18% holds then I think we’ll need to shift to a locking bias.

The economic calendar for this week is relatively light until you get to Thursday-Friday.  The Federal Reserve Bank will host its annual symposium of central bankers in Jackson Hole, Wyoming starting this Thursday.  Both Janet Yellen and European Central Bank President Mario Draghi are scheduled to speak.

Investors are listening for clues as to when the US central bank will begin to unwind its balance sheet and when the European Central Bank will end its version of quantitative easing for the European economy.

I will maintain a floating bias until technical trading patterns shift course.

Current Outlook: floating

Mortgage Rate Update May 15, 2017

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

On this day in 1800 President John Adams ordered the Federal Government to pack up and leave Philadelphia and move operations to its new home in Washington DC.  At the time the Federal Government had 125 employees and the transition took one month.  Two hundred and seventeen years later there are now more people employed by the government than in the manufacturing sector.

Speaking of politics I never thought happenings within the FBI would impact mortgage rates.  Last week’s controversial firing of James Comey may be helping US interest rates improve.  Why?  The politically unpopular firing of the former FBI director may encourage those in congress to oppose the President’s proposals on tax reform and infrastructure spending which were generally deemed to be favorable for the stock market and therefore unfavorable for interest rates.

The US yield curve is flattening.  The spread between the yield on the US 2-year & 10-year note is now at the lowest level since the election.

This is a signal that the financial markets are less optimistic about the long-term outlook for economic growth.  This is also a result of the fact that the Fed continues on a path to hike short-term interest rates.  The Fed next meets on June 13th-14th.

From a technical perspective interest rates are in a favorable range.  Momentum is on our side but oil prices are moving higher this morning so we’ll want to keep an eye on that market (energy prices are highly correlated to inflation).

Current Outlook: neutral

Mortgage Rate Update May 8, 2017

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

Last week we switched to a locking bias and indeed mortgage rates did worsen very modestly.  Rates were pressured higher on Wednesday last week after the Fed labeled weak 1st quarter economic activity as “transitory”.

Friday’s all-important jobs report showed that 194,000 new jobs were created during April and the US unemployment rate fell to a decade low of 4.4%.  Good news for the economy tends to be bad news for mortgage rates.

As you’ve probably heard France elected 38 year old Emmanuel Macron to be their new president yesterday.  He defeated far right candidate Marine Le Pen.  The financial markets are shrugging their shoulders today as it was widely expected.

Congratulations to the people of France who elected the youngest president in their history. The election has not had an impact on mortgage rates thus far.

The Wall Street Journal ran THIS PIECE over the weekend in which they highlight the fact that interest rates are vulnerable to a sharp increase if the Trump administration tax cut plan converges with the Fed’s unwinding of their balance sheet.  Should President Trump get his tax cut plan through congress the federal deficit would likely grow beyond the current forecast of $1 trillion by 2023.  This coupled with the Fed increasing the supply of bonds on the open market would almost surely drive long-term yields higher.  This is a threat we will have to monitor throughout the summer.

In the meantime mortgage rates remain at very attractive levels.  This week’s economic calendar is fairly light.  The highlights come on Thursday & Friday when we get the Producer Price Index and Consumer Price Index.

The technical outlook for interest rates looks favorable so I am going to recommend a floating bias this week.

Current Outlook: locking bias

Mortgage Rate Update May 1, 2017

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

Happy May Day!  A short history lesson: The earliest accounts of May Day celebrations, meant to celebrate the birth of Spring, dates back the Roman Republic era.  However, in the late 19th century Socialist & Communist groups adopted May 1st to be International Workers’ Day in honor of lives that were lost during an attack on striking workers.

Speaking of working this is the first week of a new month and therefore we have the all-important jobs report due out Friday.  In fact, the economic calendar is packed with significant events this week.

Starting tomorrow the Fed will conduct their regularly scheduled two-day monetary policy meeting.  According to CME group there is only a ~5% chance that the Fed will hike short-term interest rates at this meeting.  However, the markets think there is a 63% chance they will hike at the next meeting scheduled for June 13th-14th.  The Fed does not directly control mortgage rates but their comments and actions can influence them.  On Friday five Fed members are scheduled to speak and we’ll get the results of the aforementioned jobs report.  I expect to see volatility at the end of the week.

From a technical perspective we are keeping a watchful eye on the yield of the US 10-year treasury note.  This morning it broke above 2.31% which was a solid level of resistance.

Should the yield on the US 10-year treasury note close above 2.31% tonight then I think it is likely it will increase all the way to ~2.39% and mortgage rates will likely increase by .125%.  For this reason I am going to recommend a locking bias.

Current Outlook: locking bias

Mortgage Rate Update April 24, 2017

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

In case you have not set plans in motion I want to let you know that tomorrow is National Hug a Plumber Day.  You may want to contact one today and set up an appointment.  Don’t be surprised if they are a couple hours late.

Last week mortgage rates lost a little bit of ground but overall the current level of interest rates is better than they’ve been since the election last November.

Speaking of elections, over the weekend France conducted the first round of their presidential vote.  Centrist Emmanuel Macron and far right candidate Marine Le Pen appear to be headed for a run-off which will take place on May 7th.  It is expected that Macron will defeat Le Pen but let us not forget it was also expected that Secretary Clinton would defeat President Trump.  Global stock markets are reacting favorably to France’s election results which is putting pressure on US interest rates.

The yield on the US 10-year treasury note, which mortgage rates tend to follow, hit a multi-month low at 2.20% last week.  However, this morning the yield is back up to 2.27% and trending higher.  Not surprising, mortgage rates are also priced slightly worse to start this week.  From a technical perspective it appears that yields will likely move higher this week (I am guessing to ~2.40%).

The economic calendar is rich with housing data this week.  On Tuesday we’ll get the S&P Case Shiller home price index report and the FHFA house price index.  With housing supply tight across the country it is expected that these releases will show continued appreciation rates that exceed historical averages.  On Thursday we’ll get Pending Home Sales from the National Association of Realtors.

Since momentum is working against us I am going to recommend a locking bias for the first part of this week.

Current Outlook: locking bias

Mortgage Rate Update April 17, 2017

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

On this day in 1961 the Bay of Pigs invasion began.  As we know the attempt to overthrow Fidel Castro was a complete failure as it ultimately solidified the relationship between Russia and Cuba and enhanced Cold War tensions.

Speaking of tensions US interest rates have benefited from growing geopolitical uncertainty.  Global investors do not like being exposed to “risky” assets during potentially turbulent times and therefore we are experiencing a “flight-to-safety” which drives US interest rates down.

Also helping to drive rates lower has been a shift in expectations regarding the Trump Administration’s fiscal stimulus plans.  No details have been released but the markets think a much more watered down version will have to be presented in order to win congressional approval.  A more aggressive stimulus plan would add inflationary pressure to the economy and hurt interest rates and vice versa.

A less aggressive stimulus plan could also hurt US stocks.  As measured by the Shiller Price-to-Earnings ratio, which is the ratio of the S&P 500’s price divided by its average inflation-adjusted earnings from the previous 10 years, the stock market appears ripe for reversal.  If US stocks do move lower it should help interest rates remain at current levels or maybe even better.

The economic calendar for the week is heavy with fresh housing data.  This morning the home builder index, which measures optimism for US home builders, came in slightly below expectations.  Tomorrow we get housing starts and building permits.  Finally, on Friday the National Association of Realtors will release the latest existing home sales figures.

Momentum is still on our side so I will float.

Current Outlook: floating