Mortgage rates shift and appear to be moving higher

Home Loan Rates

Despite the fact that the Coronavirus continues to spread mortgage rates appear to have hit an inflection point and are moving slightly higher.

Virus in China

According to reports there are now over 20,000 confirmed cases of the deadly Coronavirus (twice as many as this time last week).  The disease continues to pop up across the globe but is primarily concentrated in China.

Home Loan rates have touched multi-years lows as fear has spread into the financial markets encouraging investors to seek “safe-havens” including the US fixed income markets.  The additional demand has driven interest rates lower.

Stock Market

US stocks are rallying today as investors bet on the long-term resilience of the global economy.  The Dow Jones Industrial Average is up over 1.5% (430 points) in early trading.  When stocks rally it tends to put upward pressure on interest rates.

The Fed

As expected the Fed left rates unchanged when they met last week and their monetary policy comments were mostly unchanged from their previous meeting.  At this point, I do not expect the Fed to hike or cut interest rates in 2020.  Of course, this does not mean that mortgage rates will remain flat because the Federal Funds Rate does not directly impact home loan rates.

The week ahead

The economic calendar heats up this week.  The most important release will come Friday when we get the all-important jobs report.  Analysts are currently expecting 165,000 new jobs to be reported for January.  There are also a couple Fed officials giving speeches throughout the week.

From a technical perspective it appears that interest rates may have bottomed out on Friday of last week and will start trending higher.  I will shift to a locking bias but if the spread of the Coronavirus accelerates then rates will likely dip again.

Current Outlook: locking

Mortgage rates continue to trend lower

It would be glamorous to be reincarnated as a great big ring on Liz Taylor’s finger.”- Andy Warhol

Happy birthday to Andy who would have been 91 today.

Interest Rates

We’ve held a “floating” position for some now and it’s paid off.  Mortgage rates are at their best levels in over three years and some analysts are calling for them to continue to trend lower.

10-Year Treasury Note

The yield on the US 10-year treasury note, which mortgage rates tend to track, has fallen from 2.05%  to 1.75% in the past 5 days.  Over that time mortgage rates have improved by .125%.  I won’t be surprised if mortgage rates improve by another .125% over the next couple weeks.

Yield Curve

With yields falling for longer duration bonds we are back in a scenario where the yield curve is inverted.  Many economists think an inverted yield curve is a signal of an impending economic recession but there are never any guarantees.

China Trade Tensions

Concern over trade tensions pushed US stocks sharply lower on Monday.  At the moment it appears that the US and China are a long ways from solving their trade disputes.  This is not favorable for near-term economic growth but favorable for US interest rates.


From a technical perspective mortgage rates are benefiting from momentum.  We could see rates go up later this week but I still believe we are in store for lower rates in the coming months.

Current Outlook: floating bias


Holiday shortened week could cause volatility

If we celebrated the day that the Continental Congress voted on the Declaration of Independence from Great Britain then we wouldn’t be in the office today. It was actually on July 2, 1776 that the colonies voted to approve the Declaration of Independence. However, following the nearly unanimous vote Thomas Jefferson took the document, made a few edits, and it was adopted on July 4, 1776. Happy 4th!

Mortgage rates adopted modest improvements last week.

The Week Ahead
It is a holiday week and the financial markets will close early on Tuesday and remain closed until Thursday. During holiday weeks trading desks tend to be lightly staffed. With fewer buyers and sellers in the marketplace we have to be on guard for volatility.

The economic calendar this week is compressed with the highlights coming Thursday and Friday. On Thursday we’ll get minutes from the last Fed meeting at which they hiked short-term rates.

On Friday we get the all-important jobs report. Analysts are expecting ~190,000 new jobs created. A number north of that estimate would likely pressure rates higher and vice versa.

US Stocks
US stocks continue to slide on fears of trade tensions. Since the middle of July the S&P 500 is off about 3% and mortgage rates have improved by ~.125%.

Technical Trading Patterns
The yield on the US 10-year treasury note continues to trade below 2.90%. As long as we remain at or below 2.90% I will continue to recommend a floating position.

Current Outlook: floating