Mortgage Rates Grappling

Mortgage rates today are so far unchanged as we see both the stock and bond markets grappling with inflation and improved economic outlooks.  The data this morning was neutral, so we did not get any direction to go from them. But there are clues about future rates in the form of global political events, White House tweets, and the economic data that has and will come this week.  Will last week's trade war bluster continue to rock markets and unnerve investors? If so, rates may hold on to last week's lows.

Where Are Mortgage Rates Going?                     

>>> Trade war concerns still influencing investors

President Trump made some comments late last week about implementing tariffs on steel and aluminum imports. Unsurprisingly, nation’s facing these tariffs did not appreciate hearing this news, leading investors to fear a possible trade war. Already we have seen several proposals from the European Union for tariffs on U.S. products. Investors are still dealing with the jitters, as all major market indexes in the U.S. are trading in the red.

The yield on the 10-year Treasury note (which is the best market indicator of where mortgage rates are going), is currently trading at 2.88%. That has moved up in the last hour after being down early this morning. Mortgage rates typically move in the same direction as the 10-year yield, so rates are flat to lower as we begin the week.

This is the week for Jobs Reports with the big news coming in on Friday.  That report is always one of the biggest market movers each month, and there is no reason the believe that this time around will be any different. Financial market participants will of course be looking at the headline reading of jobs added - however, they will be especially interested in the average hourly earnings reading to see if there is any upward inflationary pressure. Analysts are calling for a monthly uptick of 0.2%, so anything above that mark would be notable. At this point, these are the indicators that investors are looking at to help gauge what they think Federal Open Market Committee members will do at upcoming meetings.

We already have a quarter-point increase to the federal funds rate as a virtual lock at their next meeting in three weeks, but after that, the future for monetary policy gets a little murky. The dialogue has been back and forth as pundits clash about inflation and if it will increase at a pace that will necessitate a faster tightening schedule than previously anticipated.

At the start of the year, the general consensus among market participants was that there would be three rate hikes in 2018. Then we got a string of inflation reports that began to sway many investors into the position of four rate hikes in 2018. The situation has settled somewhat the past two-weeks, but the groundwork has been laid for a surge in optimism if and when we do get some more strong inflation readings.

Rate/Float Recommendation           

>>> Lock in a rate soon before they rise significantly

Even though we saw the eight-week spike stop, mortgage rates will continue to trend higher. As recommended last week, if you can take advantage of a downward blip, I suggest you secure your rate in these volatile times. We need a close under 2.80% to ignite more support for long-dated rates and mortgage rates. While the steep increase in rates has ebbed, inflation concerns are edging higher. Expecting lower interest rates is a stretch. As recommended last week, if you can take advantage of a downward blip, I suggest you secure your rate in these volatile times.