Mortgage Rates Finishing the Week Where They Started

You never know where good news will come from, but this morning’s data was very strong and would indicate higher interest rates, but we have seen just the opposite. It has been another up and down week for bond yields and mortgage rates. Right now, we are looking at rates finishing out the week at levels close to where they started. While we have lower rates now, that could change quickly.

Where Are Mortgage Rates Going?         

>>> Rates down on the day as we head into the weekend

Financial market participants have an appetite for bonds today, pushing down Treasury yields. The yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) is down almost five basis points to 2.86%. We saw that yield hit a 4-year high on Thursday at 2.93%.

Mortgage rates typically move in the same direction as the 10-year yield, and as we saw in the Freddie Mac Primary Mortgage Market Survey this week, the average rate on a 30-year fixed rate mortgage jumped up six basis points to 4.38%–its highest position since April 2014.

There is a valid chart trend line that has held any improvements in the 10-year Treasury going back to the end of December. Looking just at the trend line there is resistance at 2.84% if it holds. A penetration of 2.84% would suggest a move down to 2.78%, the 20-day moving average. Inflation concerns have increased this week on stronger CPI and PPI data; housing starts and permits can also be seen as another inflationary report for those expecting inflation to increase, climb above 2.0%, and force the Fed to move four times this year. We still think there will be just three increases, with the first one on March 21st at the next FOMC meeting.

At the March meeting, the Fed will release its quarterly forecasts for inflation, and economic growth and Jerome Powell will hold his first press conference as Fed chair. Looking at the CME Group’s Fed Funds Futures, we can see that the market thinks there’s about an 83.1% chance that we get a quarter point increase up to 1.50%-1.75%.

With this type of scenario looming over the markets, it seems as though mortgage rates are destined to continue their climb. Already in 2018, we have seen the average on the 30-year fixed rate mortgage creep up 39 basis points. That is no small increase.

Still, though, it is important to note that many analysts are calling for rates to hit 5% by the time 2019 rolls around. So, when you stop and consider that that is sixty-one basis points above the current average, it paints today’s rates in a different light.

Rate/Float Recommendation 

>>> Lock in a rate soon

The trend has not been our friend thus far this year as it has become clear that mortgage rates are moving higher. For many borrowers, this means that the best path forward is to lock in a rate as soon as possible. You really do not want to be in the position where you could have locked in a rate and then they go and spike another thirty basis points in a month. Everyone’s situation has its own set of unique variables, but you really must weigh the risks of holding off on a rate lock.