Here we go again! It’s hard to believe summer is over and a new school year has begun.
Mortgage rates are unchanged from my last ‘rate update’ on August 22nd. They remain very near all-time low levels.
This week’s economic calendar is very light. I expect mortgage rates to react to dynamics in the stock market and to “Fed speak”. As a reminder, the Fed does not directly control mortgage rates but their words and comments can create waves in the financial markets and impact the direction of mortgage rates.
The Fed is scheduled to meet on September 20th-21st. Currently the markets believe there is a 15% chance that the Fed will hike short-term interest rates at this meeting. Friday’s jobs report showed that ~151,000 new jobs were created in August which is slightly softer than the previous couple months making it more likely the Fed will not hike.
As Barry Habib of MBShighway.com perceptively pointed out earlier today, the Fed is unlikely to hike short-term rates at this upcoming meeting because the London Interbank Offered Rate (AKA “LIBOR”) is scheduled to reset on Sept. 29th. If the Fed hikes short-term rates on the 21st then the LIBOR would likely reset +.25% higher and there are literally billions of dollars of mortgages tied to LIBOR around the world. I think the Fed will wait until December to hike.
What I am certain of is that you will hear a lot of analysis on this topic over the next two weeks.
Current Outlook: neutral