Category: Rate Update

Mortgage Rate Update April 10, 2017

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

In case you weren’t aware today is National Siblings Day.  Now is a great time to call your sibling and let them know how “okay” they are (just kidding Ceri!  You are awesome).

Friday’s all-important jobs report showed that only 98,000 new jobs were created last month.  This was well below expectations and the lowest output since May of 2016.  Bad news for the economy tends to be good news for mortgage rates.

Also helping mortgage rates is the uncertainty regarding Syria and the US military action which took place last week.  Geopolitical tension tends to drive global investors into “safe havens” which benefits interest rates here in the US.

This week’s economic calendar is fairly light.  The highlights come Thursday and Friday when the Producer Price Index & Consumer Price Index are released.  Fed Chairwoman Janet Yellen is scheduled to speak later today and take questions via Twitter.  Might she hint when the Fed will begin to unwind their balance sheet (which would likely put upward pressure on rates)?

From a technical perspective mortgage rates are presently at the low end of their trading range dating back to December.  In other words, rates are currently as good as they have been for the past four months.  Could they get better?  Sure but the last four times they got hear they reversed and moved higher so I am going to maintain a locking bias.

Current Outlook: locking bias

Mortgage Rate Update April 3, 2017

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

Are looking forward to tonight’s NCAA men’s basketball championship game between Gonzaga and North Carolina?  Did you know the greatest upset of  all-time came on this day in 1978 when the Movie ‘Annie Hall’ beat out ‘Star Wars’ for best picture?  Absurd.

We start the week with mortgage rates at the best levels since late February.  This is partially because of the unfortunate subway blast which took place in St. Petersburg, Russia earlier today.  Geopolitical uncertainty tends to drive investors into safe-havens which helps US interest rates.

This mornings subway blast in Russia is causing investors to seek safety which is driving US home loan rates lower.

The financial markets are seeing some follow through on President Trump’s failed attempt to repeal the Affordable Care Act.  The Trump administration had planned to spend some of the Federal Government’s savings on a fiscal stimulus package which will have to be scaled back now.  Rates had been pressured higher on the expectation of a large fiscal stimulus package and are moving back down now.

The economic calendar heats up on Wednesday this week with the release of the minutes from the Fed’s latest monetary policy meeting.  Analysts are eager to learn more about the committee’s plan to unwind the Fed’s balance sheet which grew during the housing downturn via quantitative easing.  The Fed is a major holder of mortgage-backed securities which ultimately determine mortgage rates.  Should they aggressively sell off these assets it would put upward pressure on mortgage rates.

Finally, the all-important monthly jobs report is due out this Friday.  The market is currently expecting ~175,000 new jobs.  A number north of that would hurt mortgage rates and vice versa.

From a technical perspective momentum is on our side but given that we’re at multi-week lows I like a locking bias.

Current Outlook: locking bias

Mortgage Rate Update March 20, 2017

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

Housekeeping: As you may have noticed the past two weeks ‘rate update’ is shifting to once weekly distribution (each Monday).  I am working on a new supplemental Thursday format designed to get you ready for the weekend that I will be rolling out after spring break.

HAPPY 1ST DAY OF SPRING!  It’s almost time to bust out your shorts from the back of your closet.

Last week’s advice to “float” proved to be a good decision as mortgage rates did improve following the Fed’s decision to hike rates on Wednesday.

The Fed’s +.25% rate hike announced on Wednesday was not a surprise to the financial markets.  Interest rates behaved just like they did the last two times the Fed hiked rates (Dec. 2015 & Dec. 2016).  Prior to the announcement yields rose then following the announcement yields fell.  The chart below shows the yield on the US 10-year treasury note going from 2.33% up to 2.63% from late February until last Wednesday.  Since then yields have retreated back to ~2.49%.

In her post-meeting comments Fed Chairwoman Janet Yellen reiterated the committee’s confidence in the economy and said they would continue to “gradually” hike short-term interest rates (two more hikes expected in 2017).  Currently the financial markets are pricing in a ~58% probability that the next Fed rate hike will come in June.

This week’s economic calendar is light.  The highlights include the FHFA housing price index (Wed.), existing home sales (Wed.), and new home sales (Thurs.).

I will be keeping a close eye on the stock market and technical trading patterns.  After floating last week and seeing some gains I am leaning towards a locking bias this week.

Current Outlook: locking bias

Mortgage Rate Update March 13, 2017

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

Mortgage rates had a rough time last week.  They now stand at their worst levels in over two years.

Friday’s all-important jobs report was better than expected.  It showed that 235,000 jobs were created during the month of February and that wages increased by 2.8% year-over-year.  With these results the Fed is almost certain to hike short-term rates by .25% again on Wednesday.

Should we be concerned that mortgage rates will also increase?  After all the Fed does not directly set mortgage rates.  Mortgage rates drifted higher last week in anticipation of a Fed rate hike so in some respects the damage is done.  Furthermore, when the Fed hiked in December mortgage rates declined shortly thereafter.  Maybe we will experience the same reaction this go around.

From a technical perspective interest rates appear ripe for reversal after trending higher last week.  The yield on the US 10-year treasury note touched ~2.63% on Friday and is starting the week moderately lower.

However, we have to be careful because if yields move above the 2.63% threshold mortgage rates will continue higher as well.

This week’s economic calendar is busy.  The highlights include the Producer Price Index (Tuesday), Consumer Price Index (Wednesday), Retail Sales (Wednesday), Housing Starts (Thursday), and of course national Guinness Consumption Day (Friday).

Current Outlook: floating

Mortgage Rate Update March 6, 2017

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

Mortgage rates are unchanged from Thursday.  Also unchanged?  My antipathy for wintry weather.  As far as I am concerned Punxsutawney Phil can shove it.

This week’s economic calendar is busy.  Financial markets will be primarily focused on a trifecta of employment data which will conclude on Friday with the all-important jobs report.  The markets are expecting +188,000 new jobs.  If the jobs numbers comes in at or above that level then most analysts think a Fed rate hike next week is imminent.

As I have written time and time again mortgage rates ultimately react to inflation expectations.  If a lender believes that the purchasing power of the dollars used to repay the loan in the future will be lower then they will ask to be compensated in a higher interest rate.

Might this be the best predictor of mortgage rates?

What causes inflation?  As the ‘Wall Street Journal’ reported in THIS ARTICLE our paradigm might be all wrong.  Might mortgage rates be correlated to oil prices?  If so then we’ll be able to get mortgage rate forecasts every time we drive by a gas station.

The technical outlook looks favorable for mortgage rates.  I will maintain a floating position.

Current Outlook: floating

Mortgage Rate Update March 2, 2017

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

Hopefully you took the advice on Monday to lock because mortgage rates have worsened this week.

Do you want to see a naked picture on snapchat?  If so, you can see one HERE.  Punny, right?

Speaking of snapchat it’s shares start trading on Wall Street today.  Get yours before they disappear.  Stocks continue to rally unabated.  The Dow Jones Industrial Average and S&P 500 created new highs yesterday.  When stocks rally it tends to hurt mortgage rates.

Headed into this week the markets had assigned a 22% probability that the Fed would hike rates at their next meeting scheduled for March 14-15.  However on Tuesday San Francisco Federal Reserve President John Williams said that a rate hike was “very much on the table for serious consideration.”  Despite this being as affirmative as Abe Lincoln’s famous line “I’m almost certain that is probably true” the markets are now assigning a 75% chance the Fed will hike.  Reminder, the Fed DOES NOT directly control mortgage rates.  Even so shameless mortgage companies will use this as bait to try and get borrowers to rush into decisions.

Do you remember this chart from a couple weeks ago?  The good news is that the yield on the US 10-year treasury note, which mortgage rates tend to track, remains range bound.


The last four times times that yield has reached 2.50% they have reversed and moved lower.  Assuming history repeats itself then lower mortgage rates should be available in the days to come.  I recommend floating.

Current Outlook: floating

Mortgage Rate Update February 27, 2017

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

Shifting to a ‘floating bias’ on Thursday of last week has proved timely as yields have improved.  Speaking of floating today is National Polar Bear Day.  Apparently you can bake “cubcakes” if you really want celebrate.

As far as mortgage rates are concerned we are no longer floating.

Mortgage rates had a great ride last week but momentum appears to be shifting.  As the French presidential election draws nearer (scheduled to complete May 7, 2017) I expect that polling will be more and more significant for US interest rates.  Why?

Anti-European Union candidate Marine Le Pen is considered to be an anti-status quo candidate.  The financial markets like certainty.  Therefore, when Le Pen’s polling appears stronger US mortgage rates will improve on perceived uncertainty and vice versa.  Polling released over the weekend showed her down which is bad news for mortgage rates.

President Trump is scheduled to speak in front of a joint session of congress tomorrow afternoon.  Analysts are expecting that he will roll out a major policy initiative.  Depending on what that policy is it could impact mortgage rates.  Specifically, if he announces a major infrastructure package I would expect mortgage rates to worsen in reaction.

This week’s economic calendar is fairly busy with highlights on Tuesday (GPD) and Wednesday (Personal income & inflation).  Given that the technical trading picture has shifted I am going to recommend locking in now.

Current Outlook: locking

Mortgage Rate Update February 23, 2017

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

Despite there being a lot of noise mortgage rates are unchanged from earlier in the week.

There has been much speculation that the Trump administration will push Fannie Mae & Freddie Mac out of government conservatorship and return the companies to private shareholders.

But will they?  As industry expert Rob Chrisman laid out, imagine your son or daughter returned to your house during the recession and cut a deal with you that they would not be able to pay any rent to live under your roof in the near-term but once their financial conditions improved they would pass along their income to you and you could kick them out whenever you wish.  How quickly would you push them out if they were paying you ~$3 billion per month (not be confused with 3 brazilliion)?  Fannie & Freddie have now delivered profits to the US Treasury for 27 consecutive quarters.  The latest sum is a combined $10 billion.

Given the amount of money Fannie & Freddie are paying the US Treasury its hard to imagine a return to private shareholders.

The Dow Jones Industrial Average closed at a record high for the 9th consecutive day yesterday.  That has only happened five times since 1897 according to stock market legend Art Cashin.  Generally speaking when stocks rally it is bad news for mortgage rates.

Looking back at those five rallies though investors should be cautious.  Four out of the five aforementioned stretches led to stock market crashes (1929 & 1987) or prolonged bear markets (late 1960’s).  Should the stock market enter a down market now it would likely help mortgage rates remain low.

Lastly, minutes from the last Fed meeting were released yesterday.  The notes indicated that the Fed may act to raise short-term interest rates quicker than previously expected.  Their next meeting is March 14-15.  However, I’m not too worried because the Fed does not directly control mortgage rates and the Fed has a history of talking a big game but then not following through.

What was more substantial for me was the fact that they did not specifically mention any plans to curtail the reinvestment of principal prepayments back into the mortgage-backed bond market.  This will come at some point and when it does will likely cause mortgage rates to shift higher (see HERE to learn more).

Current Outlook: floating

Mortgage Rate Update February 21, 2017

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

The bond market was closed yesterday in recognition of Presidents Day.  Speaking of the nation’s top office, I read over the weekend that during the President’s daily briefing he was told that three Brazilian soldiers were killed overnight.  In reaction the president was stunned and showed an uncommon display of grief and emotion.  After collecting himself the president asked, “how many is a brazillion?”  (may or may not be true).

The ‘Trump Bump’ continues to roll on which is not favorable for mortgage rates (CLICK HERE to learn why).  Since early November the S&P 500 has gained nearly 13%.  During that time mortgage rates have increased by ~.50%.

Why have stocks been rallying?  First, investors anticipate legislation which will cut taxes and boost federal spending.  Second, higher anticipated inflation levels make holding bonds less attractive therefore some investors have cut fixed income holdings in favor of stocks.  Neither of these outcomes are certain.

Has the stock market become overheated?  According to data from FactSet the 12-month forward price-to-earnings ratio for the S&P 500 is at its highest level since 2004.  Furthermore, there is growing concern that France’s upcoming presidential election could rattle the global financial markets.  We’ll be keeping an eye on polls there.

The technical picture in the interest rate markets are a little muddled to start the week.  I am going to maintain a floating bias but have grown cautious.

Current Outlook: cautiously floating

Mortgage Rate Update February 16, 2017

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

Given that today is National “Do a Grouch a Favor Day” (seriously see HERE) I find it appropriate that mortgage rates are improving modestly this morning.  Mortgage rates are essentially unchanged from Monday which is a win given that pricing worsened Monday-Wednesday.

In case you missed it Fed Chairwoman Janet Yellen told congressional lawmakers that the Fed would likely hike short-term interest rates again at one of their upcoming meetings (prepare yourself for annoying mortgage radio commercials in the next few weeks which falsely claim that this will certainly lead to higher mortgage rates).

According to CME Group there is currently a 22% chance the Fed hikes at their March meeting and a 74% chance they hike by their June meeting.  The Fed does not directly control mortgage rates but their comments can influence them.

Why does the Fed hike rates?  The Fed has a dual mandate to “foster economic conditions that achieve both stable prices and maximum sustainable employment.”  Inflation data released yesterday showed that retail prices in the US jumped at the highest annual pace in nearly five years.  Fed rate hikes curb inflationary pressure.

Mortgage rates have been range bound so far in 2017.  The chart below shows that the yield on the US 10-year treasury note, which mortgage rates tend to track, has ranged from 2.30% to 2.50%.

During this time conventional 30-year rate home loans have been offered at 4.125%-4.375%.  Assuming mortgage rates remain range bound the technical outlook looks good headed into next week.  I recommend floating to see if this pattern continues.

Current Outlook: floating