Higher oil prices pressure home loan rates higher
They say that weddings are getting more and more expensive. In fact, the average cost of one surpassed $30,000 in 2017. That is enough to put 5% down and pay closing costs for a median priced home in Portland, OR..
As I type there are four days, six hours, and 27 minutes until the royal wedding for Prince Harry and Meghan Markle. That ceremony is estimated to cost $2.8 million which could be used to put 5% down on THIS HOME.
Unfortunately mortgage rates worsened modestly last week as US stocks rallied. The US stock market registered its best week in over two months which put upward pressure on home loan rates.
Geopolitical tension in the middle east coupled with uncertainty around Iran economic sanctions further supported oil prices last week which are now at three and a half year highs.
Higher oil prices are problematic for interest rates because they tend to be inflationary and inflation is the primary driver of mortgage rates.
The Week Ahead
This week’s economic calendar is relatively light. It features a slew Fed officials speaking around the country. The Fed does not directly control mortgage rates but their comments can certainly influence them.
According to CME Group there is currently a 95% probability that the Fed will hike short-term interest rates at the next meeting on June 13th. There is a 50% probability that the Fed will hike short-term rates three more times in 2018.
Due to momentum and the longer-term trend for interest rates I favor a locking position this week.
Current Outlook: locking