Category: Rate Update

Mortgage rates are unchanged from Monday.

Yesterday the Fed concluded their latest monetary policy meeting and delivered the highly anticipated statement.  As we expected (see HERE) the Fed did come slightly more “dovish” in their outlook for hiking short-term interest rates in 2016.  As a reminder the Fed does not directly control mortgage rates.

Following the December meeting the Fed had led the markets to believe that they would hike 4 times during 2016 for a total increase of 1.00%.  Since then the US stock market has declined by ~10% and equity markets in Japan, China, and France are down even more.  In their statement the Fed acknowledged the shift in the economic outlook and said they’d be “…closely monitoring global economic and financial developments…”.  At this point the markets a placing a very low probability on a rate hike at the next meeting scheduled for March.

In housing news the S&P Case-Shiller Home Price Index report was released on Tuesday.  The report covered home price changes for the month of November 2015.  In case you missed it Portland led the nation in annual home price appreciation at 11.1%.  That report coupled with the Pending Homes Sales report released by the National Association of Realtors today indicate a market where demand remains strong and supply is scarce.

From a technical perspective interest rates remain very attractive going back a couple years.  I am going to recommend a locking bias.

Current Outlook: locking bias

Interest rates are extremely attractive.  They are currently at the best levels since October of last year.

I’ve written numerous times about how the stock market can impact mortgage rates.  All else being equal when stocks do poorly interest rates benefit as a result of a “flight-to-safety”.  Want to see a great example of this?

Over the past month the S&P 500 has fallen by approximately 10% (on a related note see HERE).

Over that same time period the yield on the US 10-year treasury note, which mortgage rates tend to track, have improved as well.

The stock market will likely overshadow other factors in this holiday shortened week.  If stocks rebound then mortgage rates may reverse higher but if they continue to slump we could see rates move even lower.  If I knew with certainty what was going to happen you and I could make a lot of money.

Given that mortgage rates have improved by .125%-.25% in the past month I am going to recommend a locking bias even though I can see stocks continuing to struggle.

Current Outlook: locking bias

Mortgage rates are essentially unchanged from the beginning of the week and remain at 2-month lows.

As I have repeatedly written over the past few months the Fed does not directly control mortgage rates.  In mid-December the Fed increased short-term interest rates by +.25%.  Since then mortgage rates have improved by ~-.25%.  There you have it.

With an assist to Art Cashin, I want to take a moment to focus on the stock market.  As we know, when stocks do poorly mortgage rates tend to benefit and vice versa.  Below is a chart of the S&P 500 for the past 6 months.

As you can see the S&P 500 has experienced two 10% corrections in the past six months.  In the past 100 years this has only happened three other times.  The other three occurrences took place in 1929, 2000, and 2008.  Do you need a reminder on how those years turned out for the stock market?  Of course there is no guarantee that history will repeat itself but this is certainly a concerning prospect.

From a technical perspective mortgage rates appear ripe for reversal.  I am going to recommend a locking position.

Current Outlook: cautiously floating

Mortgage rates are unchanged from last Monday.

Global influences are helping the outlook for mortgage rates.  Chinese officials had to put a halt to trading earlier today as the Chinese stock market fell 7% after a report showed a decline in factory activity there.

Geopolitical tensions are rising in the middle east following the execution of 47 individuals by Saudi Arabia over the weekend.  Saudi Arabia announced that they would cut diplomatic ties with Iran.  The financial markets are concerned about this event spiraling into an armed conflict.  When geopolitical tensions rise, US interest rates benefit.

In response US stocks are trading sharply lower to start the new year.  The Dow Jones Industrial Average is currently off 422 points (-2.4%).  When US stocks trade lower mortgage rates tend to improve.

The economic calendar is fairly quiet this week until we get to the all-important jobs report on Friday.  I will focus on that in this Thursday’s update.

Current Outlook: floating