Mortgage Rates Rose Slightly

Mortgage rates rose today, but by a small enough amount that it shouldn't crush too many hopes and dreams.  For all intents and purposes, rates remain in line with the lowest levels since November 2016.  Any movement in recent weeks has been limited to "upfront costs" as opposed to interest rates themselves.

The stock market had a good run today on renewed optimism that lawmakers and Trump were making progress on tax reform, or at least a tax cut package.  There is broad consensus (according to Politico), according to five sources familiar with the behind-the-scenes talks, on some of the best ways to pay for cutting both the individual and corporate tax rates. How to pay for it? Capping the mortgage interest deduction for homeowners; scrapping people's ability to deduct state and local taxes; and eliminating businesses' ability to deduct interest, while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities. Still a huge hurdle about whether the tax cuts will add to the deficit and whether the cuts will be permanent or not. The momentary relief sent stock indexes higher today.  

The bond and mortgage markets saw prices slip but somewhat encouraging the selling was minor given the news. Although it looks better now that a tax package could emerge this year the odds remain high with the Trump administration still in chaos.  There was little news from the economic front today but tomorrow July new home sales comes out in the morning.

The 10yr is at 2.20% as we have not been able to break the 2.14% barrier. Other than the tax cut talk, nothing else of substance today. I have been cautiously floating, but with Jackson Hole fast approaching and speeches from Mario Draghi and Janet Yellen on Friday, and now the revival of the idea of a tax cut, my suggestion to lock is being extended to 30-days.

In summary, bonds continued their slow retreat today, further confirming treasury yields are very content remaining above 2.2%.  Last week we broke 2.2%, but sadly only for a few days.  While I do not see a huge rate uptrend on the horizon, looks like last week's rates are gone.  Way too much Fed talk about tapering reinvestments in my opinion will prevent rates from moving lower.  Of course, an unexpected news event such as what happened in Spain recently can definitely change that, but for now, favor locking.