Mortgage Rate Update September 25, 2017

We are officially in Autumn as of Friday when the Earth’s equator passed through the center of the Sun’s disk.  On an equinox the duration of the day and night are approximately equal all over the globe.  Although the season will be turning to fall I don’t anticipate mortgage rates to fall drastically anytime soon.

Although this leaf is soon to fall I don’t expect mortgage rates to follow suit.

In case you missed it the Fed did follow through last week and announce plans to unwind their ~$4.5 trillion balance sheet.  According to the announcement the Fed is expected to reduce the size of their balance sheet on a monthly basis at a pace which will take approximately 7 years to completely liquidate (although they are not likely take the program that far).  This pace is mostly in line with expectations and therefore mortgage rates did not react in a significant manner to the speech.

As I have written repeatedly I believe mortgage rates are far more likely to increase from these levels than they are to decrease given the aforementioned information.

Presently, geopolitical events are preventing US mortgage rates from increasing.  Preliminary German election results show established parties, including Chancellor Angela Merkel’s, receiving the lowest share of the overall vote in the post-World War II era.  Not surprisingly extreme-right populist parties are faring better than expected.

US-North Korean tensions continue to encourage a “flight-to-safety” trade which US interest rates benefit from.

This week the economic calendar is full of fresh housing data.  I will shift to a neutral position in the near-term but favor a locking bias long-term.

Current Outlook: neutral