Mortgage Rates Higher Due to Geo-political Uncertainty

Mortgage rates today are mostly higher. The big bomb was dropped last night when the Administration announced that the US is pulling out of the Iran nuclear agreement, despite the attempts of other countries to prevent this.  It is important to watch the 10-year Treasury note as that could be the key to seeing if there is going to be a larger shift than what has occurred thus far.

Where Are Mortgage Rates Going?                     

>>> Rates seeing a modest increase

Mortgage rates are moving slightly higher from where they were at the start of the week.  The bond market is seeing a slight reduction in some of the geo-political uncertainty that has provided some support for long bonds.  While it is still unclear what the long-term effects of the Iran announcement will be, at least the bond market now knows that the deal is not going to be removed.  A year ago, the biggest fear was military escalation and now we are bringing home three hostages and have a historic meeting scheduled between both leaders.  The bond market will be down slightly because of the removal of some of the uncertainty and not due to any economic factors today.

 

Oil jumped to $71 a barrel, never good because it increases the price of everything. Which will push prices and rates higher. Hopefully it will not also kill off the progress we have made in job creation. (Higher unemployment and prices together is called stagflation, and it is a nightmare.)

The yield on the 10-year Treasury note briefly touched 3.00% again today as investors get antsy ahead of a $25 billion 10-year Treasury auction. This inflation pressure could play a part in forcing the Federal Reserve to increase rates at a faster pace in 2018 than expected.  Mortgage rates are not directly set by the federal funds rate, but the word out from the Fed certainly plays a part in which way rates move. The more likely it looks like the Fed will raise the federal funds rate, the more upward pressure we will see on mortgage rates.

Rate/Float Recommendation           

>>> Lock now before rates move higher

Mortgage rates have jumped up once again and the spike might not be over just yet. With the yield on the 10-year Treasury note sitting just under 3.0%, investors are waiting to see what happens. If we cross that line, then it will more than likely trigger another bond sell-off, causing the yield to jump further still. Mortgage rates typically move in the same direction as the 10-year yield and, as such, are also on the verge of surging higher.

If you want to avoid the risk of locking in after this happens, you should lock in your rate now. Despite what happens in the near-term, mortgage rates are still expected to move higher in the long run so locking in a rate sooner rather than later remains the smart decision for most borrowers. If you have any further questions, give us a call or visit our website at Call The Money Man.