Mortgage Rate Update November 16, 2015

Mortgage rates effectively moved sideways last week.  We have a very modest improvement this morning which may be short lived.

There are two events on the economic calendar that have me concerned this week.  Tomorrow we get the Consumer Price Index (CPI) from the Labor Department.  Consensus estimate for Core CPI (strips out volatile food + energy prices) is that year-over-year retail inflation will hit 2.00%.  The Core CPI has been at or below 2.00% since the summer of 2012.  Inflation is the primary driver of long-term interest rates, including mortgages.

Core CPI has been at or below 2% for over 2 years. (Source: Bureau of Labor Statistics)
Core CPI has been at or below 2% for over 2 years. (Source: Bureau of Labor Statistics)

Second, the minutes from the last Fed monetary policy meeting are scheduled to be released on Wednesday.  Recent releases have not been kind to mortgage rates so I think we have to assume this one could be trouble as well.

A look at the financial markets suggests that most investors think long-term interest rates will increase in the next year but not in a rapid fashion.  According to the Wall Street Journal investors have accumulated $16.4 billion in net short positions for the US 10-year treasury note, the highest level since May (these investments pay-off when rates rise).  In addition, US bond mutual funds saw $2.13 billion net cash outflow the largest withdrawal since May.

Given the aforementioned events I am going to recommend a locking stance.

Current Outlook: locking bias

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