Category: Rate Update

Mortgage Rate Update August 11, 2016

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

Mortgage rates are slightly improved from Monday.

Interest rates here in the US remain near historic lows at the same time as our stock markets hover at all-time highs.  I wrote about this unique relationship HERE.  Normally when stocks rally it is at the expense of interest rates but given the challenges overseas the US remains a safe-haven.

Consider this, an investor who wishes to have the “safety” of buying bonds (in effect lending the US government money) the current yield on the 10-year treasury note is ~1.54%.  Or, they could invest in the 30 stocks in the Dow Jones Industrial Average and earn annual dividends of ~2.78%.  Historically bond yields tend to be higher than dividend yields because the equity investor also gets the prospect of stock price appreciation whereas the bond investor is “guaranteed” a return of principal in the future.

Dividends Word Meaning Stock Market And Incomes
Dividends Word Meaning Stock Market And Incomes

The fact that stock dividends are presently higher than bond yields suggests that investors don’t foresee much stock price appreciation in the near-term and/ or believe interest rates will potentially go lower in the future (in which case they could sell their bonds yield 1.54% at a premium).

From a technical perspective US interest rates are treading gingerly at a significant level of support.  Should today’s $15 billion US treasury 30-year bond auction be met with weak foreign demand I anticipate mortgage rates could worsen slightly.  I recommend locking to play it safe.

Current Outlook: locking bias

Mortgage Rate Update August 8, 2016

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

Mortgage rates are slightly worse as compared to last week.

Friday’s all-important jobs report was stronger than anticipated.  The report showed that +255,000 new jobs were created during the month of July and they revised higher the previously released number for June to +292,000.  Good news for the employment market tends to be bad news for interest rates.

A second consecutive month of strong jobs gains makes it more likely that the Fed will hike rates again at an upcoming meeting.  I personally don’t see them hiking rates prior to the election but won’t be surprised if they do so at the December meeting.  The Fed does not directly control mortgage rates but their words and actions do reverberate across the financial landscape.

The economic calendar for this week is light as compared to last week.  As a result, I expect mortgage rates to react to technical signals and the stock market.  Speaking of the stock market, don’t look now but eh S&P 500 is trading at all-time highs.

portland mortgage broker SP500

After trading within a narrow range of 2,106-2,175 for three weeks Friday’s jobs report provided catalyst for the index to break higher.  Should stocks break higher it would be a bad sign for mortgage rates.  If the S&P 500 is sucked back below 2,175 then I’ll be a little more optimistic about mortgage rates.

Current Outlook: locking bias

Mortgage Rate Update August 1, 2016

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

Mortgage note rates are mostly unchanged from last week.

It’s a busy week on the economic calendar and ‘rate update’ will not come out on Thursday so I will try and pack it all in here.

The Personal Consumption Expenditure price index (PCE) will be released tomorrow.  The PCE is the Fed’s favorite gauge of inflation and inflation is the primary driver of mortgage rates.  The last reading showed prices increasing by 1.6% year-over-year.  Should inflation pressure tick higher it would be a negative sign for mortgage rates.

08-01-Portland mortgage broker

Meanwhile, the US 10-year treasury note is locked into a “technical” struggle at ~1.50% which also happens to be the 25-day moving average.

So long as the yield on the US 10-year treasury yield can remain below 1.50% we’ll be in good shape.  A break above would be a bad sign for mortgage rates in the near-term.

The all-important jobs report is scheduled for Friday.  The markets are currently expecting 185,000 new jobs for the month of July.  Stronger job growth would likely push mortgage rates higher and vice versa.

Current Outlook: locking

Mortgage Rate Update July 28, 2016

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

Mortgage note rates are unchanged from the beginning of the week but closing costs are moderately lower so in fact conditions have improved.

The primary economic highlight for this week took place yesterday when the Fed released its post-monetary policy meeting statement.  As expected they left short-term interest rates unchanged (as a reminder the Fed does not directly control mortgage rates).  The tone of their statement has led the markets to believe that the Fed may hike short-term interest rates again as soon as September.  I happen to believe that December will be the absolute soonest and I won’t be surprised if they don’t hike at all until 2017.

Over the long run we’d expect mortgage rates to move higher should the Fed hike short-term rates.  However, in the short run mortgage rates could actually improve on news of a rate hike.  Since rate hikes are used to curb inflationary pressure and inflation is the nemesis of mortgage rates this may not be so bad.

Tomorrow Q2 gross domestic product figures will be released.  A strong number would likely be bad news for mortgage rates and vice versa.

I am going to maintain a floating bias.

Current Outlook: carefully floating

Mortgage Rate Update July 25, 2016

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

Mortgage rates are basically even with the latter half of last week and .125% off all-time low levels.

The Fed will meet for its normal two day monetary policy meeting starting tomorrow with a policy statement released on Wednesday.  There is basically zero chance the Fed will hike rates at this meeting but their comments always have the ability to move the markets.  The markets currently are pricing in a ~20% probability for a hike at the September meeting and ~50% for the December meeting.

The rest of the economic calendar is fairly light.  We will get the latest version of the Case-Shiller Home Price index tomorrow.  Portland has led the nation for annual home price appreciation for the past eight months.

Corporate Earnings

We are also in the middle of earnings season and this week Apple, Boeing, and Caterpillar are slated to report.  Although the domestic economy is faring well analysts will be watching for signs of how global headwinds may be impacting corporate profits.

I will maintain a floating position for now.

Current Outlook: carefully floating

Mortgage Rate Update July 21, 2016

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

Mortgage rates are priced modestly worse today as compared to the beginning of the week.

Let’s start off with some housing news this morning.  Earlier today, the National Association of Realtors released its monthly existing home sales report for June.  It showed that the pace of existing home sales increased by 3% nationwide compared to June of 2015.  The median home price for homes in the western region increased by 7.2% from June of 2015.  Overall, the housing market continues to show strength.

Speaking of strength the US stock market is on a nice run trading at or very near all-time highs.  The S&P 500 is up 8.6% since June 27th and the Dow Jones Industrial Average has traded higher for 9 straight sessions.  Normally when stocks do well mortgage rates suffer and vice versa.

PDX mortgage broker SP 500

Nothing lasts forever so should stocks reverse and move lower it could help mortgage rates hit all-time lows again.

From a technical perspective we have to be careful.  Mortgage-backed securities are trading below important support and if they fail to recover ground later today it would be a negative sign for mortgage rates headed into the weekend.  We can very carefully float to see if stocks reverse course but need to be ready to lock if that doesn’t happen.

Current Outlook: carefully floating

Mortgage Rate Update July 19, 2016

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

‘Rate Update’ woke up late this week so we’re debuting on Tuesday instead of yesterday.  Mortgage rates are unchanged from Thursday of last week.

The economic calendar is fairly light this week though the limited number of releases are heavily housing focused.  Earlier today the latest reading for housing permits and housing starts was released.  Housing starts were up a healthy 4.8% from a month earlier and housing permits also rose modestly.  The modest increase is a welcome sign for those concerned about an overheating real estate market.  Existing home sales will be reported on Thursday.

New construction is ticking along at a very healthy pace.
New construction is ticking along at a very healthy pace.

Mortgage rates have risen ~.125% off the all-time lows created directly following the ‘Brexit’ vote.  From a technical perspective mortgage rates have plenty of support at present levels and I would not be surprised to see rates regain a .125% improvement in the next week.

The Fed is scheduled to meet later this month on the 26th-27th.  There is virtually no chance the Fed hikes rates at the July meeting.  However, the Wall Street Journal is reporting this morning that the Fed is likely to hike short-term rates later this year.  As a reminder the Fed does not directly control mortgage rates but their comments can have an indirect impact.

I am going to recommend a floating bias.

Current Outlook: floating

Mortgage Rate Update July 14, 2016

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

On Monday I switched my outlook to a ‘locking bias’ and that adjustment appears to be timely.  Mortgage rates are priced modestly worse today compared to where we started the week albeit still very near all-time lows.

Like last week the US stock market continues to cruise.  The S&P 500 is trading at all-time highs as global investors pile into the US markets because many believe there is no where else around the world that looks attractive.

Unlike last week demand for US treasuries, which more directly impact mortgage rates, has waned.  Demand for “safe haven” investments has softened and as a result the yield on the US 10-year treasury has risen and mortgage rates have worsened slightly.

Overnight the Bank of England left short-term interest rates unchanged but signaled that they would likely employ additional monetary stimulus at their August meeting.  Assuming they do one would expect the US Dollar to further strengthen against the British pound which is great for traveling but not great for US exporting companies (like Nike and Intel).

Should the Bank of England act in August it could cause the British Pound to weaken further.
Should the Bank of England act in August it could cause the British Pound to weaken further.

Here in the US we saw the Producer Price Index increase at a faster pace than was anticipated last month.  It remains to be seen if this is a trend or a margin event but if it is the beginning of a trend then we would expect interest rates to be pressured higher.  We’ll need to keep a close eye moving forward.

The technical trading patterns suggest there is more to lose than to gain at this point.  I recommend locking in.

Current Outlook: locking

Mortgage Rate Update July 11, 2016

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

Mortgage rates are now back at the all-time low levels established in November of 2012.

Normally when the US stock market rallies mortgage rates suffer.  However, these are not “normal” times.  Following the “Brexit” vote investors around the globe have been seeking “safe haven” in the US financial markets.  As a result, money from around the world has been pouring into our bond market, helping mortgage rates improve, and our stock market, pushing values higher.

Portland OR mortgage SP 500 07-11-16

Portland OR Mortgage rates 10yr 07-11-16

A further signal that the financial markets are not behaving in a “normal” manner is evidenced by Friday’s all-important jobs report.  The report showed that the US economy added 287,000 new jobs during the month of June far exceeding expectations of +170,000.  Under normal circumstances a stronger than expected employment report pushes mortgage rates higher but they barely budged.

Low mortgage rates are creating a wave of new loan applications in the mortgage industry.  Last week the Mortgage Bankers Association reported that the volume of new applications for home loans increased by 14% thanks to new inquiries for refinancing increasing by 21%.  This does not bode well for appraisal turn times which are already at ~4 weeks for the Portland-metro area.

Looking ahead, the economic calendar is fairly light this week.  The highlights will come on Thursday and Friday when we’ll see a fresh set of inflation data.  From a technical perspective interest rates in the US look ripe for reversal but these signals which would be alarming in “normal” times may not play a role.  Nevertheless rates have essentially never been substantially better than they are today.  Let’s lock!

Current Outlook: locking bias

Mortgage Rate Update June 30, 2016

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

Mortgage rates remain at historically low levels following Britain’s historic “Brexit” vote which took place one week ago.

The financial markets are still trying to digest the news and forecast how the next few years will play out.  With the British pound suffering against the US Dollar investors are growing increasingly concerned about the health of the British banking system.  US mortgage rates benefit whenever there is widespread fear in the global marketplace.

The British Pound has depreciated against other currencies creating concern over the British banking system.
The British Pound has depreciated against other currencies creating concern over the British banking system.

The question many people want to know if will rates remain at these levels?  Will they reverse higher?  Will they continue to trend lower?  As always this is a very difficult question to answer but momentum is definitely on our side.

Furthermore, professional investors think rates in the US will continue to improve.  Hedge funds and money managers currently hold the highest level of derivative securities which pay-out when rates improve since 2013.  JP Morgan Chase released results of a survey of investors Tuesday which showed the highest number of respondents who think rates will improve since 2010.  Not that a majority of professional investors can’t be wrong (have you seen “The Big Short”?) but this is fairly compelling evidence that rates should at least remain at these levels for the time being.

In case you missed it Portland led the nation for the seventh straight month in terms of annual home price appreciation.  According to the Case-Shiller Home Price Index home prices rose by 12.3% from April 2015-April 2016.

I am going to maintain a floating bias.

Current Outlook: floating