Mortgage Rates Trend Higher This Morning Starting the New Year

Mortgage rates are trending higher this morning after last week seeing that they were unexpectedly volatile.

Now, on to work for Congress after the New Year. Trump wants infrastructure, Republicans and all Democrats beginning to worry about the deficit as Medicare, Social Security, and Medicaid loom. Meanwhile, the overwhelming belief that the equity markets will continue to increase this year; although many do not expect as easy an of a ride that investors had in 2017. GOP U.S. Representative Mark Meadows, speaking on CBS’s “Face the Nation,” drew a hard line on federal spending, which lawmakers are bracing to do battle over in January. On January 19th the Treasury will run out of money after Republicans passed the ball from December to January, when they passed a temporary spending bill last month. Congress does not return until tomorrow, but already heavy focus on the debt. Not that there is much to do about it after the tax bill was passed increasing the deficit by $1.5 trillion over 10 years, and that does not count the annual debt growth that would be expected without the tax cuts. Look for fur to fly in Congress over the next 17 days.

More spending, and while a lot of talk from Congress, no significant spending cuts will occur this year. This is a very key mid-term election year, as Democrats are working to take control of Congress, while Republicans trying to hold on. In the meantime, Trump wants infrastructure spending, money to build that Wall, more spending for defense and commented, “We’re going to increase non-defense discretionary spending ... by about 7 percent.” There is going to be talk about the entitlement program cuts for the less fortunate: cutting programs, meaning food stamps, housing assistance, Medicare, and Medicaid health insurance for the elderly, poor and disabled, as well as other programs created by Washington to assist the needy.

So far today, the bond and mortgage markets have taken back the improvement from last Friday. Technicals remain bearish. The equity markets remain red hot; investors looking for the key indexes to continue climbing, although some of the pros are commenting that the increases this year will not be as good as 2017.

Essential point is that mortgage rates are likely to push a little higher this week with the potential of relatively high volatility toward the end of the week. Look for the jobs report on Friday to play a big role on the direction of rates for the short term.