Mortgage Rate Update October 1, 2015

Mortgage note rates are unchanged today but the accompanying closing costs are slightly less so in fact the overall rate environment has improved modestly this week.

Attention in the financial markets is squarely focused on tomorrow’s all-important jobs report.  If you’ll remember back to last month new job creation came in at 173,000 which was below expectations.  Normally the interest rate markets are mainly concerned with the number of new jobs created yet there is another factor in the report that could prove more influential this time around.

I expect that mortgage rates could react to the average hourly earnings section in the jobs report.  As I’ve repeatedly written over the past couple months the Fed is searching for any sign of inflation which could give them president to raise short-term rates.  Market expectations are for average hourly earnings to increase by +.2%.  A result north of .2% would likely pressure mortgage rates higher and vice versa.

From a technical perspective interest rates have momentum on their side.  Since mid-September the yield on the US 10-year treasury note, which mortgage rates loosely follow, have fallen from ~2.30% to ~2.03%.  Over that time mortgage rates have improved by .125%-.25%.

The jobs report is always very difficult to handicap therefore I am going to recommend a floating bias based on the technical signals in the market.

Current Outlook: floating bias