Given that today is National “Do a Grouch a Favor Day” (seriously see HERE) I find it appropriate that mortgage rates are improving modestly this morning. Mortgage rates are essentially unchanged from Monday which is a win given that pricing worsened Monday-Wednesday.
In case you missed it Fed Chairwoman Janet Yellen told congressional lawmakers that the Fed would likely hike short-term interest rates again at one of their upcoming meetings (prepare yourself for annoying mortgage radio commercials in the next few weeks which falsely claim that this will certainly lead to higher mortgage rates).
According to CME Group there is currently a 22% chance the Fed hikes at their March meeting and a 74% chance they hike by their June meeting. The Fed does not directly control mortgage rates but their comments can influence them.
Why does the Fed hike rates? The Fed has a dual mandate to “foster economic conditions that achieve both stable prices and maximum sustainable employment.” Inflation data released yesterday showed that retail prices in the US jumped at the highest annual pace in nearly five years. Fed rate hikes curb inflationary pressure.
Mortgage rates have been range bound so far in 2017. The chart below shows that the yield on the US 10-year treasury note, which mortgage rates tend to track, has ranged from 2.30% to 2.50%.
During this time conventional 30-year rate home loans have been offered at 4.125%-4.375%. Assuming mortgage rates remain range bound the technical outlook looks good headed into next week. I recommend floating to see if this pattern continues.
Current Outlook: floating