Mortgage Rate Update November 5, 2015

Pricing for mortgage rates continue to worsen as the markets increasingly believe the Fed will raise short-term interest rates at the December meeting.  According to CME Group the markets currently believe there is a 56% chance the Fed will hike (last week it was 50%).

With all the focus on the Fed over the past few weeks the 3rd quarter earnings season has been largely ignored.  Despite the fact that yields have been inching higher the news out of the stock market is not great.  According to Bloomberg, with roughly 75% of the S&P 500 already reporting overall profits are down 3.1% which represents the biggest quarterly drop since the third quarter of 2009.  Bad news for stocks tends to be good news for mortgage rates.

Unfortunately, I don’t expect mortgage rates to react to the stock market anytime soon.  Tomorrow we get the all-important jobs report for October.  The last two releases have shown modest job growth (Aug. +136,000, Sept. +142,000).  Expectations are currently set at +181,000.  Given that recent jobless claims numbers have been relatively strong I wouldn’t be surprised if job growth exceed expectations which would not be good for mortgage rates.

Furthermore, the US unemployment rate was reported at 5.1% for September and is expected to come down to 5.0% in tomorrow’s report.  Should the unemployment rate dip even further to 4.9% then a December rate hike would likely become a certainty.

With momentum heading in the wrong direction technical trading patterns are also not on our side.  I am going to recommend locking in today.

Current Outlook: locking