We’re seeing a familiar story in the markets today. President Trump sent out another tweet warning North Korea of the consequences for any military action against Guam. That, along with another weak inflation report (CPI), is putting downward pressure on mortgage rates. Find out what this means for borrowers as we head into the weekend.
Where are mortgage rates going?
Low inflation and geopolitical tensions keep mortgage rates near year lows
The unexpected story this week has been the escalating geopolitical tensions between North Korea and the United States. Earlier in the week President Trump tweeted that there would be ‘fire and fury” if North Korea were to do anything rash toward U.S. territory Guam.
That spooked financial market participants into the “safer” play of government bonds, pushing treasury yields lower. This morning Trump sent out a new tweet stating that “Military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!” The threat has further caused investors to move more into bonds, keeping treasury yields low as we start the trading day.
The yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) is at 2.20%. That’s just about seven basis points lower from where it began the week. Mortgage rates typically move in the same direction as the 10-year yield, so rates have improved this week.
Geopolitical tension isn’t the only thing keeping treasury yields and mortgage rates lower. Inflation data was the expected market-mover this week and today’s Consumer Prices Index was marked as the most significant reading. Just as the Producer Prices report yesterday came in below expectations, so did CPI.
Analysts were calling for a monthly rise of 0.2% but it wound up only being 0.1%. That brings the year over year reading down by one tenth to 1.7%. Core CPI (less food and energy) also only managed a 0.1% monthly rise, keeping it at 1.7% year over year.
With inflation continuing to run below the Federal Reserve’s target of 2.0%, the odds of another rate hike in 2017 are slowly dwindling. At the start of the week, the CME Group’s Fed Fund futures put the likelihood of a quarter point increase in December at about 50%.
Right now, they’re giving it a 40% chance. Yes, there is a lot of time between now and December so it’s not impossible for the economy to turn around. However, there’s really nothing on the map would make anyone believe that will happen. So it seems that for at least a little while longer we should be hanging around current levels.
What does this mean for me?
Perfect time to lock in a rate
Mortgage rates moved lower this week and are sitting at levels just a hair above the lowest of the year. That’s obviously great news for anyone who is currently looking to purchase a home or refinance their current mortgage.
The long-term trend is still for rates to rise so borrowers who act sooner rather than later are likely to get the better deal.
To get the most accurate idea of what kind of rate we could offer, you should fill out our short form and get a personalized rate quote. Or, if you’d rather talk to someone, you can always call one of our experienced mortgage specialists.
They can walk you through the same process, clarifying any questions you may have, and let you know what your custom rate quote is.
Today’s economic data:
Consumer Price Index
- CPI -M/M = 0.1%
- CPI – Y/Y = 1.7%
- Core CPI M/M = 0.1%
- Core CPI Y/Y = 1.7%
- Dallas Fed Robert Kaplan at 9:40am
- Minneapolis Fed President Neel Kashkari at 11:30am
Notable events this week:
- Productivity and Costs
- EIA Petroleum Status Report
- Consumer Price Index
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