Mortgage Rates Trends Right Now Are Not Friendly

Mortgage rates jumped abruptly higher today for many of us after reports of an informal show of hands in favor of John Taylor as Trump's potential Fed Chair nominee.  Taylor is one of two candidates being seriously considered, and he's generally seen as being less rate-friendly than the other candidate, current Fed board member Jerome Powell.  Trump indicated he was "very very close" to making a decision yesterday, so markets are especially sensitive to headlines that seem to answer the question - how will be the next person to lead the world's biggest and most influential central bank?

Stocks continued to improve again today, the DJIA up over 200 points at one time before slipping back some into the afternoon session. The current new support coming from the belief that there will be a tax cuts this year after the Senate passed the budget resolution last week allowing the tax cuts that have been proposed to move ahead - and be passed. At least that is what investors are thinking propelling the stock indexes into new highs almost daily. But the mud has been flying all day between Sen Corker, Trump and McCain. When you think it cannot get uglier in Washington, you have not seen anything yet. Trump and Corker like kids on the playground.

Arizona Republican Sen Jeff Flake said today he will not seek re-election and used his speech to blast Trump - another Republican taking a jab at Trump and the tax cut bill now being debated.

Trump met with Republican senators on today to try to build consensus for proposed tax cuts in a meeting that was overshadowed by an exchange of insults between the president and Corker. Meanwhile Trump is still warring with John McCain. Corker, a debt conservative suggested he would not vote for the tax bill as currently structured, refusing to add to the deficit that is expected to increase the federal deficit by $1.5 trillion over 10 yrs. Trump though believes that will not happen because the economic growth would offset the increased costs of the cuts. One other issue that some are concerned about; the increases in Medicare, social security payments and entitlements that will happen as baby boomers move full tilt into the systems.

It is a huge bet that the economy will improve enough to offset the tax cuts and most Democrats already bemoaning that the cuts being talked about will only benefit the wealthy. It is the mantra Democrats have used for years when it comes to tax cuts, so it should not be a shock that Democrats are not going to vote for the plan that has yet to be completely revealed - that is expected on Nov 1st. The House is eager to get a tax bill voted on before the Dec. 8 deadline for a possible government shutdown comes, as it is likely to distract from the tax bill.

Treasury sold $26B of 2s this afternoon, and the results were weak. We finally get some economic news tomorrow with Durable Goods and New Home sales.

In the meantime, mortgage rates are as high as they've been since early July, but that's still the most alarming way to phrase the reality because the gap between the very lowest rates last week and this afternoon's highest rates is still less than one eighth of one percent for almost every lender.  That's $7/mo per $100k financed.  While that's not insignificant over time, it keeps rates operating in a historically narrow range and still much closer to long-term lows than anything else.

In summary, the trend is not our friend at the moment. Bonds sold off again today, as chatter on potential Fed chairs and tax reform rattled markets.  We are past the point of concerns about rates rising, they ARE rising.  I have been locking early, and been telling all of my readers to do such.