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MORTGAGE RATES HIGHEST IN 9 MONTHS

2022 is not off to a great start for mortgage interest rates.  During the week between Christmas and New Year, rates moved to their highest levels in about 9 months.  Then to start the first week of the new year, mortgage interest rates have moved up again.  Generally, 30-year mortgage rates currently range from 3.2% to 3.3% with no points.  In the short term, it is possible that mortgage interest rates may come down some, but the overall expectation for 2022 is for mortgage interest rates to move higher.

How Are Mortgage Rates Determined

Contrary to what many believe, the Federal Reserve and banks do not directly determine mortgage interest rates.  However, the policies of the Federal Reserve can and do impact the market and market perceptions.  The current policies of the Federal Reserve that are impacting rates are two-fold:

  1. The Federal Reserve has begun to reduce the number of mortgage-backed securities that they purchase on a monthly basis. This is seen as bearish for mortgage rates and is primarily the reason mortgage rates moved higher in the 4th quarter of 2021; and
  2. In the event Inflation continues to increase as we move into 2022, the Federal Reserve will be forced to adjust their policy to fight inflation. Historically, inflation has led to higher interest rates across the board.

Mortgages are similar to bonds and there are many types of bonds in the bond market.  Movement in the bond market generally translates to movement in mortgage rates.

Additionally, lenders make additional adjustments to rates based on factors like credit scores, down-payment amounts and other risk factors. Those adjustments rarely change, so day-to-day movement in an individual rate quote is almost always determined solely by bond market movement.

Going Forward

Most analysts expect interest rates to be higher in 2022 than they were in 2021.  Many forecast mortgage rates between 3.5% and 4% although the timing of these increases is unknown.  What is known is that rates bottomed out around 2.625% for a 30-year fixed rate in early 2021 and ended 2021 with 30-year mortgage rates .5% higher at approximately 3.125%.

Even with very little economic news to warrant it, mortgage interest rates declined this week.  Overall, mortgage rates are very near where they were at the beginning of October.

Next week the following events will occur and economic data will be released that could impact mortgage interest rates:

  1. The ISM National Services Index and the JOLTS report will be released on Tuesday; and
  2. There will be Treasury auctions on Wednesday and Thursday.

This week there was very little economic data released or news that had an impact on mortgage interest rates.  As a result, rates were largely unchanged from last week.

Next week the following events will occur and economic data will be released that could impact mortgage interest rates:

  1. The Third quarter GDP report will be released on Wednesday;
  2. The Federal Reserve will meet on Wednesday where a .25% rate reduction in the discount rate is expected;
  3. The Core PCE Index will be released on Thursday; and
  4. The Employment Report will come out on Friday.

On Wednesday the Federal Reserve cut the federal funds rate by one-quarter point which was expected.  However, the announcement did not directly impact mortgage interest rates at all.  The other economic data that was released during the week was mixed and mortgage interest rates ended the week slightly lower than last week.

Next week the following economic events will occur and economic data will be released which could impact mortgage interest rates:

  1. The New Home Sales report will be released on Wednesday;
  2. The Pending Home Sales report will come out on Thursday; and
  3. The Durable Orders report will be released on Friday.

Mortgage interest rates moved higher this week due to a number of factors.  Primarily due to stronger than expected economic data being released and also a reduction in trade tensions (although likely temporary).   Additionally, there continue to be mixed messages from the Central banks in the U.S. and Europe regarding interest rate policy.  All of these factors were negative for interest rates this week and mortgage interest rates ended the week noticeably higher than last week.

Next week the following economic events will occur and economic data will be released that could impact mortgage interest rates;

  1. The Housing Starts report will be released on Wednesday;
  2. The Federal Reserve will meet on Wednesday where a 1/4 point reduction in the discount rate is expected to be announced; and
  3. The Existing Home Sales report will come out on Friday

The economic data released this week was mixed following the release of the employment report on Friday.  Additionally, the ongoing trade issues with China continue to impact the global equity and bond markets.  Mortgage interest rates were largely unchanged from last week.

Next week the the following economic events will occur and economic data will be released which may impact mortgage interest rates:

  1.  The Consumer Price Index will be released on Thursday; and
  2.  The European Central Bank will hold its next meeting on Thursday.

It was a quiet week in the equity markets and the bond markets.  None of the economic data released this week impacted mortgage interest rates which closed the week largely unchanged from last week.

Next week the following events will occur and/or economic data will be released which may impact mortgage interest rates:

  1.  ISM Manufacturing Index will come out on Tuesday;
  2. The ISM National Services Index will be released on Thursday;
  3. The monthly Employment report will come out on Friday; and
  4. Mortgage markets will be closed on Monday in observance of Labor Day.

There were increasing concerns about a global slow down in economic activity which led to steep decline in equity markets around the world this week.  Continuing negotiations between the U.S. and China on a trade deal seemed more positive this week.  These two factors largely offset each other and mortgage interest rates ended the week only slightly lower.

Next week the following events will occur and economic data will be released which could impact mortgage interest rates:

  1.  The Existing Home Sales report will come out on Wednesday;
  2. The minutes of the July 31 Federal Reserve meeting will be released on Wednesday; and
  3. The New Home Sales report will be released on Friday

Trade tensions with China continued this week and overshadowed other economic news this week.  Mortgage interest rates fell to their lowest level in three years early in the week but rose later in the week.  Overall mortgage interest rates ended the week slightly lower than last week.

Next week the following economic data will be released and events will occur:

  1. The Consumer Price Index will come out on Wednesday;
  2. The Retail Sales report will be released on Thursday; and
  3. The Housing Starts report will come out on Friday.

During the week the Federal Reserve announced a quarter point reduction in the rate, the unemployment report was released on Friday and trade tensions between the U.S. and China flared up with the announcement of new tariffs on Chinese imports.  As a result, mortgage interest rates ended the week lower.

Next week the following events will occur and economic data will be released that may impact mortgage interest rates:

  1.  The ISM National Services Index will be released on Monday;
  2. The JOLTS employment report will be released on Tuesday;
  3. The Producer Price Index will come out on Friday; and
  4. There will Treasury auctions on Wednesday and Thursday next week.

This week there was stronger than expected economic data that was released.  However, at the same time there were increased expectations that the Federal Reserve and the European Central Bank may both lower interest rates in the second half of the year and as a result mortgage interest rates ended the week slightly lower.

Next week the following economic events will occur and economic data will be released which could impact mortgage interest rates:

  1. The Existing Home Sales report will be released on Tuesday;
  2. The New Home Sales report will be released on Wednesday;
  3. The European Central Bank will meet on Thursday; and
  4. The Gross Domestic Product report will come out on Friday.

 

This week the inflation report (Core Consumer Price Index) was released and the results showed inflation rising at a higher rate than anticipated.  As a reaction to this report mortgage interest rates rose late in the week and are higher than they were last week.

Next week the following economic events will occur and economic data will be released:

  1. The Retail Sales report and the Industrial Production report will both be released on Tuesday; and
  2. The Housing Starts report will be released on Wednesday.

The week ended on a volatile note which is common for a holiday week.  While a decline in bond yields worldwide were positive for mortgage rates better than expected jobs data on Friday caused mortgage rates to rise to close the week.

Next week the following economic events will occur and economic data will be released:

  1. 1.  The JOLTS report will be released on Tuesday
  2. 2.  The minutes of the June 19 Federal Reserve meeting will be released on Wednesday; and
  3. 3.  The Consumer Price Index will be released on Thursday.

Mortgage interest rates were volatile this week due to news regarding the ongoing trade negotiations between the U.S. and China, comment from Federal Reserve and mixed economic data that was released.  Overall mortgage interest rates were largely unchanged at the end of the week compared to last week.

Next week the following event will occur and economic data will be released that may impact mortgage interest rates:

  1. The ISM National Manufacturing Index will be released on Monday;
  2. The ISM National Services Index will be released on Wednesday;
  3. The Employment report will be released on Friday; and
  4. The ongoing trade negotiations and the G20 meeting should be watched closely as well.

The economic data that was released this week was stronger than expected however, an announcement by the European Central Bank that it may provide additional stimulus measures led to a decline in global bond yields, including mortgage interest rates in the U.S.  As a result, mortgage interest rates end the week at their lowest levels in over 2 years.

Next week the following events will occur and economic data will be released that may impact mortgage interest rates:

  1. The New Home Sales report will be released on Tuesday;
  2. The Durable Orders report will come out on Wednesday; and
  3. The Core PCE Index will be released on Friday

Trade news related to Mexico and the economic data released during the week caused come volatility in mortgage interest rates, especially early in the week.  As a result, rates were slightly higher at the end of the week compared to the end of last week.

Next week the following economic data will be released and events will occur:

  1. 1.  The Housing Starts report will be released on Tuesday;
  2. 2.  On Wednesday the Federal Reserve will meet and provide guidance on future interest rate increases; and
  3. 3.  The Existing Home Sales report will be released on Friday.

Since the beginning of the year, 30-year mortgage interest rates fell from around 5% to 4.5%.

Now, over the past 4 weeks, 30-year mortgage rates have fallen to 4%, and for some, into the high 3% range for those with the best credit and lower loan-to-values. 20-year rates are approximately the same as 30-year rates and 15-year rates are even lower.

Mortgage interest rates are at their lowest levels since late 2017.

The interest rate environment is very favorable for anyone looking to purchase or refinance in the second half of 2019. For anyone that has a current interest rate of 5.25% or higher, it may be advantageous to evaluate refinancing in order to lower the monthly payment.  The magnitude of the benefit will largely be dependent on the loan-to-value ratio and credit scores.

For those looking to reduce the current payment and save money, I would recommend monitoring mortgage rates over the next 30 to 60 days since it is anticipated that they could move lower.

Another strategy that can be attractive for some is to consider refinancing into a shorter-term mortgage. There are 10, 15, 20-year or custom mortgage term loans available.  We can provide an analysis that shows the payments, the interest savings achieved and a comparison of the mortgage paydown compared to the current mortgage.

Lastly, with the rapid price appreciation in Colorado, many people who have considered getting an equity loan may have been reluctant to refinance their current first mortgage if it has a low interest rate. In some cases, it may be more beneficial to do a line of credit.  We can help run the numbers to see whether it is better to leave an existing mortgage in place and obtain a Line of Credit or refinance the entire mortgage.  This analysis compares the new rate versus the rate on the old mortgage plus the rate of the Line of Credit (i.e. the blended interest rate).

If you have any questions or if you want us to provide an analysis, please contact either Wayne or Kim.

With weaker than  expected economic data being released and comments from the Federal Reserve indicating a willingness to lower interest rates, mortgage interest rates fell this week to their lowest level in almost two years.

Next week the following economic data will be released and events will occur that could impact mortgage interest rates:

  1. 1. The Consumer Price Index will be released on Wednesday;
  2. 2. The Retail Sales report will be released on Friday; and
  3. 3. There will be Treasury Auctions on Wednesday and Thursday.

The economic data that was released during the week was mostly neutral for mortgage interest rates and took a back seat to the ongoing impact of trade negotiations with China and new trade tension with Mexico.  These factors caused steep declines in the stock market this week leading to a significant drop in mortgage interest rates.

Next week the following economic data will be released and events will occur which may impact mortgage interest rates:

  1. The ISM National Manufacturing Index will be released on Monday;
  2. The ISM National Services Index will be released on Wednesday;
  3. The European Central Bank will meet on Thursday; and
  4. The monthly Employment Report will be released on Friday.

The stock market continued to struggle this week due to ongoing trade tensions between the US and China.  With little other economic news this week mortgage interest rates declined due to the volatility in the stock market.

Next week the following economic data will be released and events will occur which could impact mortgage interest rates:

  1. Pending Home Sales and first Quarter GDP will be released on Thursday;
  2. The Core PCE Price Index will be released on Friday; and
  3. The mortgage markets will be closed on Monday in observance of Memorial Day.

The economic data released this week was weaker than expected and mortgage interest rates declined during the week.  Additionally, ongoing trade negotiations between the U.S. and China added to the volatility in the markets.

Next week the following economic data will be released and events will occur that may impact mortgage interest rates:

  1. The Existing Home Sales report will be released on Tuesday;
  2. The minutes from the May 1 Federal Reserve meeting will be released on Wednesday;
  3. The New Home Sales report will come out on Thursday; and
  4. The Durable Orders report will be released on Friday.

This week there was a significant amount of economic data and news released.  Mortgage interest rates were very volatile during the week although the news was and data was mostly mixed with some being positive and some being negative.  As a result, by the end of the week interest rates were largely unchanged from last week.

Next week the following events will occur and economic data will be released that could impact mortgage interest rates:

  1. The JOLTS report which measures job openings and labor turnover will be released on Tuesday;
  2. The Consumer Price Index report that measures inflation will come out on Wednesday;
  3. There will be Treasury auctions on Wednesday and Thursday; and
  4. There will be continued focus on the ongoing trade negotiations between the US and China as the deadline approaches.

On Friday the first quarter GDP report was released which was favorable for mortgage interest rates due to continued low inflation and slower growth in consumer spending.  Late in the week mortgage rates fell and ended the week lower than last week.

Next week the following economic data will be released and economic events will occur:

  1. The core PCE report will be released on Monday;
  2. The ISM Manufacturing Index will be released and the next Federal Reserve meeting will occur.  Both on Wednesday;
  3. The Employment report and the ISM National Services Index will be come out on Friday.

There was very little economic news this week with Retail Sales report being the most significant economic data released.  However, the report had little to no impact on markets and mortgage interest rates were unchanged during the week.

Next week the following economic data will be released and economic events will occur:

  1. The Existing Home Sales report will come out on Monday;
  2. The New Home Sales report will be released on Tuesday;
  3. The Durable Orders report will be released on Thursday; and
  4. First Quarter GDP will be released on Friday.

With most investors expecting US economic growth to continue at a moderate pace and very little other economic news mortgage interest rates rose slightly this week although overall the economic news was mixed.

Next week the following economic events will occur and economic data will be released:

  1. The Retail Sales report will come out on Thursday;
  2. The Housing Starts report will be released on Friday; and
  3. The mortgage markets will close early on Thursday and be closed all day Friday in observance of Good Friday.