Category: Rate Update

Global yields may help US mortgage rates improve

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Global connectedness made a major advancement on this day in 1911 when the New York Times sent the first around the world telegram.

The telegram which simply read, “This message sent around the world” left the New York Times newsroom at 7pm and arrived back in 17 minutes after being relayed via San Francisco, the Philippines, Hong Kong, Saigon, Singapore, Bombay, Malta, Lisbon, and the Azores.  Read below to learn how global connectedness is influencing the direction of mortgage rates.

Mortgage rates sideways

After home loan rates improved by ~.25% at the beginning of August they have essentially flattened out for the past two weeks oscillating within a .125% range.

Mortgage rates improved at the tail end of last week but increased over this past weekend.

In the near term it seems like we may see more sideways movement.  However, the longer-term outlook still looks positive for borrowers.

International Pressure

Presently much of the developed world has interest rates which are lower than here in the US.  The Central Bank equivalent target interest rate is 0% or less in the Eurozone, Denmark, Switzerland, Sweden, and Japan.

There is currently $16.7 trillion in negatively yielding government bonds.

As a reminder, the Fed currently has the Fed Funds rate target at 5.25% and our 2-year through 30 year bonds are yielding between 2-3%.  Think that is high?  At least we’re not in Argentina where the central bank target rate is 58%!!!

Although US interest rates are not likely to go straight down I do think lower yields in other countries will put downward pressure on our interest rates in the months to come.  If a borrower can afford to be patient it probably makes sense to do so.

Jackson Hole

Speaking of central banks, global bankers are meeting this weekend in Jackson Hole, Wyoming for the annual economic symposium.  Fed Chairman Jerome Powell is scheduled to deliver a speech on Friday in which many analysts think he will indicate another Fed rate cut later this year.

Outlook

Mortgage rates may increase in the near-term is we see US stocks rally again.  However, my longer-term outlook remains unchanged.  For borrowers who remain patient in I think it makes sense to float.

Current Outlook: floating bias

Divide between 10-year treasury and mortgage rates grows

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

On this day in 1961 East German Soldiers began laying barbed wire and bricks in downtown Berlin.

Over the course of the next 12 years the Berlin Wall was constructed.  The 96-mile long wall made of concrete blocks and barbed wire was meant to divide Soviet controlled east Berlin from US-allied West Berlin.

Speaking of divisions we are seeing a divide growing between mortgage rates and the US 10-year treasury note.

10-Year Treasury Note & mortgage rates

Since August 1st the yield on the US 10-year treasury note has fallen by .40% (from 2.05% to 1.65%).  Normally we’d expect to see 30-year fixed mortgage rates improve by .25%-.375% when the 10-year treasury yield improves this much.

However, since August 1st mortgage rates have only improved by .125%.  The spread between the US 10-year treasury yield and fixed mortgage rates is wider than normal and I expect either mortgage rates to improve further or the yield on the treasury to rise so that the spread normalizes.

Yield Curve

Speaking of the US 10-year treasury note… it is yielding 1.68% as of this morning.  The yield on the US 2-year treasury note is trading at 1.65%.  Should the yield on the 2-year treasury note exceed the 10-year yield then you will definitely hear about it from the media.

The yield curve has not been inverted since 2007.  Going back 40 years every time the yield curve has inverted (1978-1982, 1989-1990, 2000-2001, and 2006-2007) a recession has followed (1981-1982, 1990-1991, 2001, 2008-2009).

Recessions

Although the most recent economic recession was tough on housing (or was housing touch on the recession?) previous recessions were not.

In fact, during the 1981, 1990, and 2001 economic slowdowns the S&P Case Shiller home price index actually rose during that time.  Therefore, if you are a prospective homebuyer and think homes will get cheaper in the near-term I wouldn’t hold my breath.

Outlook

I still think (and am hopeful) home loan rates will improve as the spread between the US 10-year treasury yield and mortgage rates tighten.  I will remain in a floating position.

Current Outlook: floating bias

Mortgage rates continue to trend lower

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

“It would be glamorous to be reincarnated as a great big ring on Liz Taylor’s finger.”- Andy Warhol

Happy birthday to Andy who would have been 91 today.

Interest Rates

We’ve held a “floating” position for some now and it’s paid off.  Mortgage rates are at their best levels in over three years and some analysts are calling for them to continue to trend lower.

10-Year Treasury Note

The yield on the US 10-year treasury note, which mortgage rates tend to track, has fallen from 2.05%  to 1.75% in the past 5 days.  Over that time mortgage rates have improved by .125%.  I won’t be surprised if mortgage rates improve by another .125% over the next couple weeks.

Yield Curve

With yields falling for longer duration bonds we are back in a scenario where the yield curve is inverted.  Many economists think an inverted yield curve is a signal of an impending economic recession but there are never any guarantees.

China Trade Tensions

Concern over trade tensions pushed US stocks sharply lower on Monday.  At the moment it appears that the US and China are a long ways from solving their trade disputes.  This is not favorable for near-term economic growth but favorable for US interest rates.

Outlook

From a technical perspective mortgage rates are benefiting from momentum.  We could see rates go up later this week but I still believe we are in store for lower rates in the coming months.

Current Outlook: floating bias

 

Mortgage rates slightly improved

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Feeling busy and anxious about all the things you have to get done?

Just remember, “stressed” spelled backwards is “dessert” and today is National Vanilla Ice Cream Day!

Interest Rates

Home loan rates have improved modestly from last week.

Existing Home Sales

The National Association of Realtors released figures earlier today which showed that the number of existing home sales slid 2.2% in May compared to a year earlier.  Despite low mortgage rates and a strong labor market a lack of housing supply is causing the number of units sales to decline.

Home Prices

According to the aforementioned report the median home price in the US increased for the 88th consecutive month.  A median priced home increased by 4.3% compared to a year earlier and is at historic highs.

The Fed

The Fed is scheduled to meet next week and is widely expected to cut short-term interest rates.  The markets are currently predicting a .25% cut but some think the Fed may come up and slash rates by .50%.

This rate cut is already baked into the rates consumers see today.  As a reminder, the Fed does not directly set mortgage rates.

Outlook

From a technical perspective mortgage-backed bonds have some room to rally which would help interest rates improve.

The remainder of this week’s economic calendar is relatively quiet.

Current Outlook: floating bias

Mortgage rates back off of historical lows as economic outlook is mixed

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

You can file this one in the “wish I had reason to celebrate” folder.  Today is #NationalPersonalChefDay!  Don’t forget to pat your chef on the back and thank them for all their hard work.

Interest Rates

Mortgage rates are unchanged this week after increasing by ~.125% last week.

Recession looming?

The US economy is currently in the longest economic expansion in modern history.  It started back in 2009 and has been in tact for 121 months.  Naturally, all good things must come to an end and as this growth pattern grows long in the tooth more and more economists will begin to predict a near-term recession.

Earlier today an index that tracks global freight movement was released and showed seven straight months of contraction.  According to the report the US economy is, “signaling economic contraction.”

I am not sure how reliable this indicator is but if the US economy does move towards economic contraction one would think that US mortgage rates would improve.

Or not…..

Earlier today the monthly retail sales report showed stronger than expected consumer activity.  Furthermore, an index which gauges homebuilders’ confidence also came in higher than anticipated.

The rest of the week

The remainder of the week features Fed Chairman Jerome Powell speaking (later today), housing starts/ building permits (Wednesday), and leading economic indicators (Thursday).

Outlook

In the near term mortgage rates are testing important technical layers.  I expect mortgage rates to be at these levels or possibly even higher in the next 3-7 days.  Beyond that I think mortgage rates will come back down.

Current Outlook: floating bias

Rates modestly worse but long-term trend in tact

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Congratulations to the US Women’s soccer team who capped a dominating performance on Sunday by winning the World Cup.  The US recorded 26 goals during their seven games in the World Cup and only gave up 3!

Interest Rates

Mortgage rates are modestly worse to start the week after the Bureau of Labor Statistics released a stronger than expected employment report on Friday.

Jobs Report

The all-important jobs report showed that 224,000 new jobs were created during the month of June and eased recession concerns.  Yields increased modestly following the release.

Home Loan Performance

A strong labor market and healthy home price appreciation is creating conditions for low delinquency.  CoreLogic’s monthly Home Loan Performance Insights Report was released earlier today and shows delinquency is currently at a 20-year low across the US!  It’s hard to imagine a housing crash is on the horizon given that statistic.

The Fed Speaks

Fed Chairman Jerome Powell is scheduled to speak Wednesday and Thursday this week.  The Fed’s Open Market Committee is scheduled to meet July 31st and there is currently only a 5% probability that the Fed will cut rates at that time (the markets assign a 60% chance of a cut at the Sept. 18th meeting).

The minutes from the last Fed meeting are also scheduled to be released on Wednesday.  Should his comments or the minutes alter the outlook for a rate cut it could cause some volatility in the financial markets.

The rest of the week

Aside from Fed speak we’ll be watching the Consumer Price Index scheduled for release on Thursday and the Producer Price Index on Friday.  Hotter than expected inflation could put upward pressure on rates.

The long-term trend remains in our favor so will remain in a floating stance.

Current Outlook: floating

Historically low mortgage rates help home prices accelerate

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Have a happy and safe 4th of July!  Our offices will be closed on Thursday but otherwise around to help your customers!

Interest Rates

US home loan rates continue to benefit from pessimism regarding US-China trade talks.

US-China Trade

This past weekend leaders from the “G20” met in Osaka, Japan.  Headed into the weekend some analysts had predicted progress between US and Chinese trade negotiators which would likely pressure interest rates higher.  However, it appears that little progress was made and as a result mortgage rates remain extremely attractive.

Home Prices

CoreLogic’s monthly Home Price Index report was released earlier today and showed a jump in monthly home price appreciation.  After months of decelerating home price gains the report showed that nationwide homes appreciated by +.9% in May alone (annualized increase of +11%)!

After increasing by +3.6% from last year CoreLogic is predicting that home prices will increase by +5.6% over the next 12 months.

The Week Ahead

The financial markets are closed on Thursday in recognition of the 4th of July holiday.  I expect trading desks will be thinly staffed so we could see some volatility in stocks & interest rates on Friday.

We’ll get the all-important jobs report this Friday.  Expectations are for +170,000 new jobs for the month of June.  May’s results were a big miss which has helped mortgage rates improve.

Current Outlook: floating bias

US 10-year treasury note dips below 2.00%, mortgage rates improve

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

The fourth of July is right around the corner which means it’s time to start looking for the best place to buy fireworks.  Some people look for the lowest prices but as my friend Rob Chrisman advises the best fireworks can be found where the salesperson has three fingers and an eye patch.

Interest Rates

Interest rates around the globe continue to trend lower.  The yield on the US 10-year treasury note, which mortgage rates tend to track, has pierced below 2.00% for the first time since 2016.

What’s this mean for mortgage rates?

Home loan rates are currently at the lowest levels since 2017 based on the US 10-year treasury note hovering around 2.00%.  If the US 10-year treasury dips down to the lows of 2016 (~1.4%) then we could see mortgage rates improve by another .50%.

There is no guarantee that this will take place but momentum appears to be on our side.

Home Prices

The S&P CoreLogic Case-Shiller home price index for April was released earlier today and showed that home price appreciation nationwide was +2.5% year-over-year.  Here in Portland home prices grew by +2.6% which was unchanged from the month before.

I suspect home price appreciation may pick up a little in May and June given that interest rates have improved significantly since April.

The Week Ahead

Later today Fed Chairman Jerome Powell is scheduled to speak.

At the beginning of the year the financial markets were predicting the Fed would hike short-term interest rates twice during 2019.  Now expectations are that the Fed may cut rates twice.  Chairman Powell’s comments will be closely watched in the coming weeks.

On Thursday we’ll get the latest reading on pending home sales and ono Friday we’ll get the Fed’s favorite gauge of inflation (PCE).

Given that momentum is still on our side I will maintain a floating position.

Current Outlook: floating bias

Mortgage rates continue to move lower

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

“Give a man a fish and he eats for a day.  Teach a man to fish and he will neglect his job and family thereafter.”- anonymous

Today is National Go Fishing Day!  As anglers take to the waterways mortgage rates are sinking!

Mortgage Rates

Mortgage rates continue to trend lower prompting many homeowners to evaluate their refinance options.  The Mortgage Bankers Association reported that refinance applications jumped 47% last week compared to the prior week.

European Interest Rates

Yields in the US are following European interest rates lower.  Concerned with declining economic growth European Central Bank President Mario Draghi stated earlier today that he is prepared to cut short-term interest rates and accelerate bond-buying programs with the hopes of driving interest rates down.

The yield on a German 10-year bund is currently negative .30%.  Comparatively the yield on a US 10-year treasury note is trading at ~+2.06%.

The Fed

The US central bank begins their regularly scheduled two-day monetary policy meeting today.  Tomorrow they will announce any changes to US short-term interest rates.  I don’t expect they will cut rates tomorrow but their comments could help mortgage rates improve further.

The Week Ahead

The weekly economic calendar is relatively light.  The highlights include the aforementioned Fed announcement (Wednesday) and Existing Home Sales (Friday).

Momentum is on our side which is why I shifted to a floating bias last week.  I will maintain that position.

Current Outlook: floating bias

Home loan rates remain low as payment performance improves

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

On this day in 1950, Ben Hogan bested two other golfers in an 18-hole play-off to win the US Open.  The remarkable aspect of the win was only 16 months earlier Hogan was involved in a near fatal car crash that left him unable to walk for months.  Doctors predicted he may never golf again.

The win was Hogan’s third major championship.  Where did Hogan win his first major championship?  Right here in Oregon at the Portland Golf Club!

Mortgage Rates

Home Loan rates have increased very modestly in the past week as trade tensions have eased and US stocks have rallied.  If stock finish in positive in positive territory today it will mark the 7th straight day of gains.

Home Loan Performance

Corelogic released its monthly Loan Performance Insights report earlier and it showed that only 4% of all mortgages in the United States are 30 days or more delinquent.  This is down from 4.3% a year earlier and is near historic lows.

Mortgage loan portfolios are performing extremely well which means credit standards should remain accommodating in the near future.

Home Equity

Contributing to strong loan performance is the fact that most homeowners have a significant amount of equity built up in their homes.  According to the most recent Corelogic Homeowners Equity Insights report the average homeowner has seen a +5.7% increase to their home equity since last year.  

Here in Oregon the average homeowner gained ~$7,000 in equity which is why homeownership is still one of the best ways to build long-term financial wealth.

The Week Ahead

Last week’s all-important jobs report disappointed the markets showing only 75,000 new jobs created during May.  

This week the economic calendar holds significant data released on Wednesday (Consumer Price Index), Thursday (Import/ Export prices), and Friday (Retail Sales & Consumer Sentiment).  

Momentum remains on our side so I will shift to a floating bias.

Current Outlook: floating bias