Category: Rate Update

Mortgage Rate Update February 13, 2017

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

Mortgage rates worsened during the latter half of last week.

Mortgage rates will be looking for love tomorrow from Fed Chairwoman Janet Yellen.  She is scheduled to provide testimony to congressional lawmakers tomorrow and Wednesday.  Much like the origins of St. Valentine’s Day are not well understood neither is the relationship between the Fed and mortgage rates.

Mortgage rates are looking for some love from the Fed this week.

I am particularly interested to hear if Yellen will comment on when they might discontinue the practice of reinvesting principal repayments back into the mortgage-backed bond (MBS) market.

You might remember the term “quantitative easing” (“QE”) which was thrown around exhaustively from 2009-2012.  During this time the Federal Reserve essentially printed money and purchased, amongst other things, mortgage-backed bonds with the intent of driving interest rates lower.  Although the Fed is no longer actively engaging in “QE” they are using the principal repayments from refinances and home sales to repurchase/ replace MBS holdings which in effect helps to keep rates down.  If and when they discontinue this practice we could expect mortgage rates to worsen.

Looking at the rest of the economic calendar for the week we’ll get some fresh inflation data Tuesday and Wednesday, retail sales on Wednesday, and new housing starts on Thursday.

Unfortunately momentum is working against us so I will maintain a locking bias.

Current Outlook: locking

Mortgage Rate Update February 9, 2017

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

Mortgage rates continued to improve modestly this week and are currently at multi-week lows.  That said pricing is modestly worse this morning so momentum may be shifting.

With heavy snow covering much of the northeastern seaboard we have to be prepared for some volatility in the financial markets.  Its likely that fewer traders are able to make it into their offices and therefore we can assume there are fewer buyers and sellers which can lead to wider swings.

As I stated on Monday the economic calendar has been light this week.  In the absence of significant data mortgage rates tend to react to technical trading patterns and the stock market.

The technical outlook is not favorable.  The yield on the US 10-year treasury, which mortgage rates tend to track, has traded between 2.30%-2.60% since the end of November.  It got down to 2.34% yesterday and has bounced to 2.38% this morning.  Unless the yield can dip below 2.30% it looks as if rates may reverse trend higher.

Stocks are also rallying this morning on news that the Trump administration intends on accelerating tax cuts.  When stocks rally it tends to hurt mortgage rates.

I will maintain a locking recommendation.

Current Outlook: locking

Mortgage Rate Update February 6, 2017

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

Mortgage rates are unchanged from last week but accompanying closing costs are modestly lower.

In case you missed it Friday’s all-important jobs report showed stronger than expected hiring (+227,000 jobs) which would normally be a bad signal for mortgage rates.  However, average hourly earnings increased by less than expected which tempered inflationary fears.  Therefore, mortgage rates had a muted response.

This week’s economic calendar is relatively light.  The highlights will come on Friday with import/ export prices and consumer sentiment.

The US 10-year treasury note, which mortgage rates tend to follow,  is currently yielding ~2.43%.  According to a prominent bond money manager this is artificially low and the markets should expect higher yields in the future.  Since the Bank of Japan and European Central Bank are still enacting quantitative easing measures it is placing artificial barriers that are preventing higher rates.  Once those programs stall rates will rise.  When will that happen?  That is up for debate.

Source: Wall Street Journal

Last week President Trump signed an executive order which requires that the Treasury Department take a detailed look at the Dodd-Frank financial regulation law and make recommendations for revisions.  It is generally assumed that the president will push to roll back regulations that affect the mortgage industry.  It is not clear which rules he is targeting and the Senate will have to approve the changes with a 60 vote super majority (Republicans only hold 52 seats).  This is a topic I will be keeping an eye on.

Current Outlook: locking bias

Mortgage Rate Update February 2, 2017

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

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

As expected the Fed left short-term interest rates unchanged yesterday following their 2-day monetary policy meeting.  The Fed DOES NOT directly control mortgage rates but their decisions and comments can certainly influence them.  The Fed did not clarify when the next rate hike may come but did state they remain on track to lift short-term interest rates in 2017.  Fed Chairwoman Janet Yellen is scheduled to testify in front of Congress February 14th-15th so we’ll see if she drops any clues then.

Tomorrow we’ll get the all important monthly jobs report.  The markets are currently expecting ~175,000 new jobs created.  A number north of that would likely pressure mortgage rates higher and vice versa.  In addition to the number of new jobs created analysts will be looking at average hourly wage growth.  Are wages growing at an accelerating pace?  If so, it would also be a bad sign for mortgage rates.

From a technical perspective mortgage-backed bond (MBS) prices are trading within a very tight range.  The risk is that when MBS prices “break-out” of the range they have a greater likelihood of moving abruptly for better or worse.

The jobs report is very hard to handicap.  Given that it is human nature to value loss more than a potential gain I am going to recommend locking in today.

Current Outlook: locking

Mortgage Rate Update January 30, 2017

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

Mortgage rates are moderately improved from Thursday.

On Friday the Commerce Department released Gross Domestic Product figures for the final quarter of 2016.  It showed that the economy expanded by a 1.9% annual pace for the final three months of the year which is lower than the markets were hoping for.

The current cycle of economic expansion began back in 2009 making it one of the longest on record.  However, since then the overall economy has only grown by 15.5% making it one of the shallowest as well.

Source: Wall Street Journal

This week’s economic calendar is a busy one.  Earlier today we got the latest reading on the Personal Consumption Expenditure Price Index which is the Fed’s favorite gauge of inflation.  Excluding volatile food and energy prices the index rose by 1.7% from last year which is still below the Fed’s target of 2% but trending higher.  Inflation is the primary driver of long-term interest rates.

On Wednesday the Fed will release its latest monetary policy decision.  It is widely expected that the Fed will leave short-term interest rates unchanged after hiking in December.  However, as we know their comments can also impact the financial markets.

Lastly, on Friday we’ll get the latest all-important jobs report.  I will focus on that in my Thursday ‘rate update’.

Mortgage rates are attempting to improve but face strong technical resistance.  I recommend a locking bias.

Current Outlook: locking

Mortgage Rate Update January 26, 2017

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

Mortgage rates are not having a great week.

As I’m sure you’ve heard the Dow Jones Industrial Average topped 20,000 yesterday and managed to close above this psychological level.  The Dow is extending those gains today.  When stocks rally it attracts new capital which is often sourced from the bond market.  Weakness in the bond market is what pressures interest rates higher.

Source: CNBC.com

It took only 42 days from the Dow to reach 20,000 from 19,000.  This was the second fastest 1,000 rally in Dow history.

Unfortunately the technical trading patterns have eroded and the outlook for mortgage rates is not extremely optimistic.  Rates have risen this week and they may get worse in the near future.

Current Outlook: locking

Mortgage Rate Update January 23, 2017

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

Mortgage rates are mostly unchanged from last Thursday’s ‘rate update’.

Will President Trump’s policies help or hurt our economy?  This is one of the primary questions the financial markets are dealing with right now.

On one hand a large infrastructure investment would provide fiscal stimulus that would certainly create growth and possibly pressure mortgage rates higher.

What economic policies will the new administration draft up?

However, on the other hand an anti-free trade platform is likely to hurt economic growth which could help mortgage rates.  I expect the markets will continue to see-saw until additional details are presented.

The economic calendar is fairly light this week.  The highlights include existing home sales (Tuesday), new home sales (Thursday), and Gross Domestic Product (Friday).

From a technical perspective mortgage rates are improving gradually compared to Friday so I will recommend floating.

Current Outlook: floating

Mortgage Rate Update January 19, 2017

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

Well, after a nice 5-week run mortgage rates ticked higher yesterday giving away half the improvements they gained on the way down.

The culprit?  Fed Chairwoman Janet Yellen delivered a speech yesterday in which she stated that Fed officials expect to raise short-term interest rates “a few times a year” through 2019.  This was more aggressive than her previous public comments and leads the markets to believe that inflation expectations may be higher than anticipated.

Speaking of inflation expectations, the Wall Street Journal ran THIS STORY yesterday which confirms just that.  The spread between US treasuries and inflation protected treasuries has been widening signaling that investors believe inflation will be higher in the future than it presently is.  Inflation is the primary driver of mortgage rates.

The jobs picture continues to be strong both nationally and locally.  This is bad news for mortgage rates but good news for housing demand.  The number of Americans filing for initial jobless claims fell last week to one of the lowest levels on record.

Furthermore, it was reported that Oregon’s unemployment rate fell to 4.6% which is down nearly 1% from last summer.

All in all the momentum has shifted against us.  Fortunately we remain within a technical range of trading so we could see rates improve off these levels.  For now though I will shift to a locking bias.

Current Outlook: locking bias

Mortgage Rate Update January 17, 2017

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

Mortgage rates remain at the best levels following the election and about .25% improved from recent highs.

Inflation expectations is the primary driver of mortgage rates.  This is because inflation erodes the purchasing power of future interest payments.  Therefore, when lenders think inflation will rise in the future they charge higher rates of interest to compensate and vice versa.

Inflation is the primary driver of mortgage rates.

Following Donald Trump’s election investors expected higher inflation because of his campaign promises to increase government spending (infrastructure) while cutting taxes.  However, the financial markets are now tapering inflation expectations.

Inflation adjusted treasury yields (nominal yield minus current inflation) have declined to the lowest levels since the election and mortgage rates have also improved off recent highs.

Speaking of inflation the release of the latest Consumer Price Index is scheduled for tomorrow.  It has been trending higher as of late and if this trend continues then of course we’d expect upward pressure on mortgage rates.  Aside from the CPI the remainder of the week looks to be fairly quiet.

From a technical perspective the gradual improvement of interest rates over the past month may be running out of steam but for now we’ll try to remain on track.  I will continue to float but with a more cautious outlook.

Current Outlook: floating

Mortgage Rate Update January 12, 2017

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

Although mortgage note rates are unchanged today the accompanying closing costs are modestly lower so in fact the rate environment has improved slightly this week.

In case you missed it FHA announced Monday that FHA mortgage insurance premiums will be reduced beginning January 27, 2017.  If you ever work with FHA buyers then I would encourage you to read the details HERE.

Improved mortgage rates and lower FHA mortgage insurance premiums should help improve affordability but as we know affordability has eroded significantly in recent years.  Has housing reached an inflection point?  Read about and share your thoughts on the topic HERE.

Beginning in late November and again in mid-December I wrote that I thought the financial markets had overreacted to the results of the election.  It took longer than I hoped but it finally looks like the markets are reversing course.  I do not expect mortgage rates to drop to levels seen prior to the election but they have improved by .125%-.25% over the past couple weeks.  Let’s be thankful for that.

From a technical perspective momentum is on our side so I will maintain a floating position.  That said, if you have been floating for the past couple weeks it may not be a bad plan to lock in and take your profits off the table.

Current Outlook: floating