Weekly Mortgage Rate Update- 1-21-25
Weekly Mortgage Rates
January 21, 2025
Forget everything I said last week
Just kidding…sort of :) A little bit of shift in the inflation outlook led to rates improving last week when rates clawed back all the losses from the previous week. Read on for the details.
CPI was better than expected
The Consumer Price Index (CPI) can be a market mover, and this time it moved in the right direction. CPI showed inflation was lower than expected with the core increasing 0.2% for the month of December, dropping the annual pace from 3.3% to 3.2%. This is the lowest monthly increase since 2020 and the first meaningful decline in 5 months. It’s a positive move considering that the outlook had inflation heating up, not cooling down. Most of the improvement is because shelter inflation came down. CPI is heavily weighted in shelter costs, so we see shelter impact the numbers more in CPI than on the other inflation readings. The shelter reading also lags and takes time to work into the CPI report; because you only see the shift in costs when new leases are signed, and each reading is from a small regional sample. We have expected the softening of shelter costs to work its way into CPI for some time and it looks like that is happening now.
Is the Fed also changing its tune?
Last week we said the Fed has been clear on its messaging; signaling they are done with rate cuts for now. But Fed Governor Waller went on CNBC last week after the inflation reading and his comments, we could argue, are a big reason rates improved so much. He said maybe 3 cuts this year if inflation improves and soon. The market had been pricing in 0-1 cuts in 2025 based on previous Fed comments just days ago. Waller said, “I may be a little more optimistic about inflation coming down than the rest of my colleagues, and that’s what’s driving my outlook for the path for policy.” He is in the running to be the next Fed President, perhaps he is setting the tone for his policy, a more dovish platform that current Fed chair Powell. We have a fed meeting next week so we will see if Waller is just an outlier or represents a consensus soon.
Trumps actions are now in focus
With 100’s of executive orders already flying off the new president’s desk, markets are playing close attention to how the new policy agenda will impact the economy and inflation. Rates have been on the rise since the election, partly on the belief that the economy will be stronger and inflation also higher under his administration. Just last week we saw some comments from economist reflecting that maybe their inflation concerns were a little overblown and now don’t expect him to act as rash with tariffs as previously thought. So far, he hasn’t issued any broad tariffs and the outlook for oil prices with the expansion of drilling is helping drive the improved outlook on future inflation. The markets this morning reflecting a little relief rally as a result. It’s a constant recalibration - but this is what the markets are currently focused on.
Trend Reversal?
Not a lot of economic news this week so the focus will be on Trump’s policies. Technically, we need the 10-year Treasury to close below 4.59% to see a more meaningful improvement in mortgage rates as it represents a key resistance level. As of this writing, we are below it because markets are liking the administration’s actions so far. If we close under it, we could potentially see some lower rates in the days ahead. It’s tried for a few sessions and hasn’t been able to hold below that level, so that’s what we have our eye on right now.
Today’s Rates
|
Loan Type |
Conventional 30 year |
JUMBO 30 Year |
FHA 30 year |
VA 30 Year |
|
Interest rate |
6.625% |
6.75% |
5.875% |
6.375% |
|
APR |
6.77%* |
6.87%** |
6.88%*** |
6.52%**** |
LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)
RATES ARE CURRENT AS OF 1-21-2025. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE
*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935
**APR BASED ON ESTIMATED FINANCE CHARGES OF $16,430
***APR IS BASED ON ESTIMATED FINANCE CHARGS OF $10,969 THIS INCLUDES FHA MORTGAGE INSURA
NCE PREMIUM
****APR BASED ON ESTIMATED FINANCE CHARGES OF $8343
FEES INCLUDE 1% POINTS, $1095 PROCESSING AND $0 UNDERWRITING FEE
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.