Mortgage Rates Unchanged - Heading Higher

Mortgage rates were unchanged to slightly higher today, keeping them in line with their highest levels in more than 2 weeks, depending on the lender.  There were no significant economic reports or market moving headlines for bonds/rates today, but that will quickly change as the week progresses.  Wednesday brings a key inflation report - the Consumer Price Index (CPI).  Markets are also interested in any meaningful tax bill headlines, including the vote scheduled for the House version of the bill on Thursday. Amid this potential volatility, it's safer to assume the recent trend toward higher rates will remain intact until we see a strong move lower.

Trump saying today he wants Republicans to slash the top tax rate paid by the wealthy and end the Obamacare individual healthcare mandate. Generally not a favorite idea for Democrats cutting the tax wealthy people pay. Republicans still talking that the House will vote for its bill prior to Thanksgiving.  A positive step but only a baby one with the Senate bill having many differences that will have to be worked out. Likely December will be all about ironing out the differences. One hurdle that Republicans want to sweep under the mat, the increase in Treasury debt over the next 10yrs Trump and many others saying that the loss of tax revenue from the proposed cuts will be made up from increased economic growth and higher wages. History is very clear - the idea of increased growth and higher wages will not close the increased deficit debt. 

Markets and investors though could not care any less about the deficit increase - that is a problem for the future. Republican tax plans in the House and Senate would each add about $1.5 trillion to the federal deficit over the next decade. The current deficit is at $20 trillion. I am not qualified to address the specifics but many economists now commenting that the annual payments to the deficit will exceed GDP growth.  

Last week in the Senate there was momentum to delay the corporate tax cuts for one year - not until 2019. The equity markets here and globally have advanced to levels that include about all the possible positives. Now we expect markets will trade in narrow ranges with backing and filling but not much of those huge daily gains that have become commonplace since last June.  

We have not seen much changes in interest rates since last November.  I believe that will remain the case now if tax cuts and low inflation are being questioned. I have said it a multitude of times, that any significant decline in interest rates will have to be on the back of declines in the key stock indexes. Watching the advance/declines at the NYSE - stocks that are declining are more than stocks that are increasing. The Fed is expected to increase the FF rate on December 13th.

In summary, rather sedate day in rate markets today, with small increase late this afternoon.  There is not a lot of economic data on tap this week, and with President Trump's Asian trip failing to ignite any international drama, I am not sure where markets will focus.  I have not seen any advantage by floating, so I am still advising clients to lock, especially if you are closing in the next thirty