Happy Birthday to Lance Armstrong who is celebrating the start of his 48th trip around the sun. Many people believe Lance is the greatest abuser of performance enhancing drugs in cycling history but I’m not sure. I think Elliott from the movie ET has some answering to do.
Home loan rates have been cycling higher since the end of August. Mortgage rates have now increased by +.25% and are at 7-year highs.
Earlier today President Trump announced the US would be imposing tariffs on approximately $200 billion worth of Chinese imports. The Chinese government wasted no time in announcing counter tariffs on roughly $60 billion of US exports.
Normally I would expect these announcements to potentially help US interest rates because it would be a bad sign for the stock market. However, the US stock market is trading higher today and US interest rates are suffering.
Last week it was reported that average hourly earnings increased by 2.9% for American workers. This was hotter than expected and stoked fears of wage-based inflation which is not friendly to home loan rates. However, in a separate report the Consumer Price Index was reported to have only increased by 2.2% which is very close to the Fed’s target.
Speaking of the Fed they will be meeting next week and announcing a +.25% hike to short-term interest rates on Wednesday. The Fed does not directly influence home loan rates (don’t believe me? See HERE). Furthermore, we already know the Fed will be hiking rates and that news is built into the mortgage rates available today.
The Week Ahead
This week’s economic calendar is heavy on housing date with housing starts, building permits, and existing home sales due out.
I am hopeful that mortgage rates reverse lower but for now momentum is not on our side. I will remain in a locking stance.
Current Outlook: locking