Mortgage Rates Unchanged So Far

Mortgage rates today are unchanged so far, even though within the last hour we have seen some pressure being put on the MBS. The only pertinent information scheduled is the afternoon release of the Fed's "Beige Book." The only time these notes from the Fed, which indicate members' opinions about the direction the economy is taking, are important is when they contain something unexpected. So, the release could change rates later today, but that would be unusual.

Where Are Mortgage Rates Going?                     

>>> Sideways, but for how long?

The term “earnings season” gets thrown around quite a bit in financial news.  Basically, this is a report card for companies letting us know how they are doing throughout the year.  Bonds do not necessarily care as much as stocks, but they still care.  While the stock market may not be the primary input for the bigger-picture moves in bonds (which takes its que from Fed policy, the Treasury issuance outlook, and growth/inflation), the correlation is very high during periods of indecision and consolidation.  And bonds have certainly been in such a period since late February.

To some extent, geopolitical and economic risks can affect both stocks and bonds in such a way that the correlation happens naturally.  Case in point, trade war fears simultaneously hurt stocks and cooled the underlying growth/monetary policy outlook that informs rates.  When trade war rhetoric came off the boil, it marked a reversal for both stocks and bonds.  If it remains on a simmer, we are not likely to see a big bear market take shape in stocks.  From that more stable baseline, if earnings season helps stocks move back up to 2018's previous highs (and above), it would very likely put renewed pressure on bonds to do the same.

Markets and investors have put the trade fears and inflation worries on the middle burner for the moment, turning all attention to all the Q1 earnings that are coming in now. So far, although early in the earnings season the reports have been positive and confirming what investors and traders have believed, that earnings were strong in the quarter. National Economic Council, Larry Kudlow, said yesterday that the both the United States and China were working toward resolving the current dispute that some economists have warned verges on a trade war. In the background, the administration is working with North Korea to set up a summit meeting that presently is expected in June. Nukes are the man issue. 

Rate/Float Recommendation           

>>> Do not get caught, best to lock

There has been little change in the rates since the middle of February. The wider view is rates are going to increase with the Fed and ECB ready to increase rates to fend off that elusive inflation specter that continues to defy. Inflation is likely to increase but unless a trade war occurs, the increase in inflation is not likely to be as critical as many currently believe. Consumers have retreated recently slowing any idea of increasing pricing. How long that lasts are the questions difficult to anticipate.

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. If you have yet to talk to a lender, give me a call or visit my website at Call The Money Man.