Mortgage Rates Looks to End 8-Week Spike
The week started off slowly, but certainly does not look like it will end that way. We saw a lot of movement both days when the chair of the Federal Reserve Jerome Powell gave his testimony. Then yesterday President Trump came out and started to talk about imposing tariffs on steel and aluminum, which sent stocks reeling and put some upward pressure on mortgage rates.
Where Are Mortgage Rates
Going?
>>> Trump roils markets with trade war talk,
but which way
President Trump stated on Thursday that he is getting ready to
implement tariffs on imported steel and aluminum products. The stock market did
not take well to the conversation, with the Dow Jones Industrial Average
falling 420 points on the day. Today, those concerns are staying front and
center for market participants, with all of the major market indexes trading
lower by about 1.00%. These investors are fleeing stocks for the perceived
safety of precious metals and government bonds.
The yield on the 10-year Treasury note (the best market
indicator of where mortgage rates are going) is currently sitting at 2.83%.
That’s up almost two basis points from the start of the day, but below where it
started the week at 2.88%. Mortgage rates typically move in the same direction
as the 10-year yield, so rates are up a little bit on the day but flat to
slightly lower on the week.
It is true that mortgage rates did rise for the eighth
consecutive week, but it looks like that string will be broken, which I am sure
is just a pause out there. We have been on a mostly downward trajectory since
Wednesday. There is no doubt, though, that mortgage rates are still poised for
move higher in the coming weeks and months.
Fed Chair Jerome Powell did paint a very optimistic picture of
the U.S. economy, leading many financial market participants to believe that
three rate hikes are in the cards for 2018–with a strong maybe for four rate
hikes. It is not a direct relationship but the Fed increasing the nation’s
benchmark interest rate – the federal funds rate – will result in mortgage
rates moving higher.
Rate/Float
Recommendation
>>> Lock in a rate soon before they
rise significantly
The average rate on a 30-year fixed rate, according to the
Freddie Mac PMMS, has risen forty-eight basis points since the start of the
year. Market analysts are calling for another fifty-basis point increase before
the year is over. It does not take a seasoned home buyer to understand that you
do not want your rate to be higher by a half a percentage point. The bottom
line here is that the longer you wait to lock in your rate on a purchase or
refinance, the greater the likelihood you are going to get a higher rate.
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