Mortgage Rate Update November 9, 2015

Pricing for mortgage rates continues to worsen.

In case you missed it Friday’s all-important jobs report came in stronger than expected.  The release showed that US employers added 271,000 new jobs during the month of October.  It also showed that average hourly earnings increased 2.5% from a year earlier.  As I have written about multiple times on ‘rate update’ wage growth has been all but absent during this economic expansion which is one reason why inflation has remained below the Fed’s target of 2%.  If wages continue to grow one would assume this would eventually create inflationary pressure which is bad for mortgage rates.

With a stronger than expected jobs report in hand the markets now are pricing in a 70% probability that the Fed will hike at the next monetary policy meeting slated for Dec. 15th-16th.

Unfortunately many consumers are not aware that the Fed does not directly control mortgage rates and therefore may think they have until December 16th to lock in “today’s low rates”.  However, longer term yields have already reacted.  Back on October 27th the yield on the US 10-year treasury note was ~2.05%.  As of this morning it is yielding ~2.35% (+.3%).  Mortgage rates have increased by ~.25% over this same time period.

Looking ahead for the remainder of the week the financial markets will be closed this Wednesday in honor of Veteran’s Day.  On Friday we’ll get a reading on the Producer Price Index and Retail Sales.

It’s been a difficult couple weeks for mortgage rates and momentum is still working against us.  I will maintain a locking bias.

Current Outlook: locking