Mortgage Rate Update January 25, 2016

Mortgage rates are unchanged from last week and remain at multi-month lows.

It’s Fed week so I anticipate the financial markets will trade sideways until the monetary policy committee releases its statement on Wednesday at 11AM PST.  As a reminder, the Fed does not directly control mortgage rates but their comments and actions do impact the financial markets, including mortgage rates.

As we know the Fed embarked on a rate hiking cycle at the mid-December meeting.  In addition, the Fed released the chart below showing where the individual committee members forecast the Federal Funds rate to be in the future.

Source: The Federal Reserve
Source: The Federal Reserve

This chart shows that the majority of committee members had forecast 4 more +.25% hikes during 2016 (for a total +1.00%).  I use the term ‘had’ in the previous sentence because there is speculation that the Fed will back off this forecast given the recent turmoil in the financial markets.  Keep in mind, the US central bank is tightening monetary policy while its counterparts in Europe and Japan are all easing.

If the Fed does publish a less “hawkish” statement it could spark a rally in stocks which we know would not be favorable for mortgage rates.  Given that I think this is a real possibility I am going to recommend locking before Wednesday.

Current Outlook: locking before Wednesday