Mortgage Rates Facing Volatility This Week

The morning began with bonds and mortgage markets opening lower. Not surprising with the FOMC meeting, the Fed’s quarterly forecasts of GDP, inflation, and projections for Federal Fund rates and the first press conference of Jerome Powell happening on Wednesday afternoon. With no financial reporting due today, we are primarily working with White House news, rumors and tweets today.

Where Are Mortgage Rates Going?                     

>>> Busy week can lead to some volatility

This week will be very busy starting off with the G20 Summit.  Today and tomorrow, economic leaders from twenty different nations will gather in Buenos Aires, Argentina to talk about a variety of financial issues. Many of the reports out so far are hyping up the discussion around cryptocurrencies and how they are possibly contributing to an increase in money laundering and other illegal exploits.

There is no direct relationship from the G20 to mortgage rates.  However, with it being such a high profile political/economic event, there is always the possibility for something to be said that will stir up the markets and impact the direction of current mortgage rates.

Tomorrow, the anticipated Federal Open Market Committee (FOMC) meeting will get underway with their new chairman and everyone will be waiting for their decision on Wednesday. This meeting has been in the cross-hairs for investors for many weeks, now, as it is widely speculated that the FOMC will increase the nation’s benchmark interest rate - the federal funds rate - by a quarter of a point. That will bring the target range up to 1.5% to 1.75%. One thing that we do not know going into Wednesday is what kind of changes FOMC members will make to their rate hike outlook.

For a while there in February there was a steady stream of strong inflation readings that made it seem as though the Fed would have to take a more aggressive approach to rates, but then we have kind of seem a tempering to those expectations with weaker reports over the past few weeks.

Still, no one is entirely certain on what the Fed will say on Wednesday. What we do know, though, is that the more aggressive the Fed’s tone is on Wednesday, the more likely it is that mortgage rates will move higher. On the other hand, if the Fed comes off as taking a cautious approach, rates would be more likely to stay flat or fall lower. 

The most notable data releases in the U.S. are the Durable Goods and New Home Sales reports, due out early Friday morning. The key phrase for durable goods is “bounce back” as they’re expected to tick up 1.7% in February after a 3.7% drop in January.  New Home Sales are also expected to jump up from their prior reading. Positive economic data tends to push mortgage rates higher, so we could see an increase to rates as we approach the weekend if these reports meet their expectations.

Rate/Float Recommendation           

>>> Lock now before rates push higher  

Mortgage rates could certainly bounce around this week as the various headlines and reports come in. Given this expectation, we recommend that borrowers keep an eye on current mortgage rates and try to lock in sooner rather than later.

In a rising rate environment, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer you lock, the higher your upfront costs. If you are weeks away from closing on your mortgage, that is something to consider. On the flip side, if a higher rate would wipe out your mortgage approval, you would probably want to lock in even if it costs more.