Mortgage rates were on the rise last week, with the gains coming in response to progress on the tax reform bill that drove U.S Treasury yields northwards.
Rates have been relatively choppy of late, with sentiment towards FED monetary policy, tax reforms and the ongoing investigations into the U.S administration factors influencing over the near-term.
Home buyers and those looking to refinance may be wondering when the best time will be to get the best rate and, whether the combination of tax reforms and a rate hike will lead to an upward revision to next year’s mortgage rate forecasts.
According to Freddie Mac’s latest rates released on Thursday, 30-year fixed mortgage rates rose from 3.90 to 3.94, whilst continuing to sit below the 4.13% from the previous year. 15-year fixed mortgage rates saw a larger increase, rising from 3.30% to 3.36%, which was the same as the previous year.
Things could have been worse for rates had the government funding issue been resolved ahead of Thursday’s numbers. Yield gains were held back over concerns that the U.S government may shut down by Friday’s close, with Trump’s recognition of Jerusalem as the capital of Israel also raising the alarm bells. The Middle East has seen tension rise through the year, with the Saudis looking to take a stronger position in the region. The latest Trump move hasn’t made things any easier, adding to the laundry list of key drivers for U.S Treasuries this month.
Sentiment towards the outlook for mortgage rates is mixed as of now, while things could become a little clearer on Wednesday with the release of the FOMC economic projections. Economic indicators have been relatively upbeat and the impact of tax reforms on corporate earnings is also anticipated to be positive. For now, the markets have priced in 3 rate hikes for next year, with the inflation environment and Jerome Powell’s appointment as the FED Chair keeping rate hike expectations on the lower side.
For this week, the 2-weeks of additional funding for the government will have eased appetite for U.S treasuries, which would provide further upside for mortgage rates, with Friday’s wage growth and Nonfarm payroll numbers also likely to contribute to higher rates.
Recent rises in both new mortgage and refinance applications suggest that the general consensus is that rates are likely to remain on an upward trend, which would be in contrast recent projections for 2018, though how much of this comes from stronger labor market conditions rather than rate expectations remains to be seen.