Mortgage Rates Hold Steady Following Inauguration

Mortgage rates were higher across the board this morning as global bond markets added to yesterday's weakness (weaker bond markets = higher rates, in general).  Investors were on edge ahead of Trump's inauguration address as there was speculation that he'd offer more details on specific stimulus plans.  When those details never came, markets reacted accordingly.  Stocks moved lower and bond markets improved. 

Today was about the Inauguration of President Trump and Vice President Pence. That was all there was with no data and the entire event took all day. Trump’s address was as his speeches have been since last November.  Not much philosophy, more of what he has talked about for the last three months. There will be wide speculation on what he said, and what he did not say - otherwise it was a great celebration with protests, pomp and pageantry.

Next week will focus on the new Trump administration and what the president does and says. He talks a lot about infrastructure jobs to boost employment and wags but like Obama eight years ago, there are no shovel ready major projects ready. The equity markets still living the dream but when it wakes reality will take over - all of Trump’s plans will take a lot longer to engage and in the meantime the Fed is poised to increase rates once again. Trump’s cabinet is not secure yet, he will likely initiate executive orders repealing some of Obama’s executive orders as he has said he would. ObamaCare redo also on the front burner. 

Yellen and other Fed officials and pundits still think 3 more increases this year. Yellen says a gradual move higher - if there is to be three the next one is likely to be in March at the FOMC meeting. Fed officials will be on lockdown next week with the Jan FOMC meeting on the 31st.

For some borrowers, this week's biggest impact on housing expenses comes not from rates, but from the FHA mortgage insurance news.  As feared, just over an hour after the inauguration, the Trump administration revoked the mortgage insurance cut announced earlier this month.  For those affected, the change in monthly payment would have been roughly equivalent to a 0.375% change in rate.

In summary, I am not a fan of locking on Friday and today is no different.   Starting around noon today, bonds have started to move into positive territory, so I am hopeful that 2.50 on the 10yr will serve as a ceiling to prevent a move higher.  With the recent weakness from yesterday and the late day rally, lenders will be very slow to pass along any improvements.   So I favor floating over the weekend and evaluate pricing on Monday.