Weekly Mortgage Rate Update-10-01-2024
Looking at the big picture mortgage rates have stayed about the same since Mid-September despite all the news since then, and there has been a lot of news.
PCE inflation reading released Friday was in line with expectations and showed a continued trend lower overall. Inflation increased 0.1% for the month of August and Core PCE is now at a 2.7% annually. The annual pace should decrease further if inflation stays on this path.
There are some headwinds for the interest rate path. The longshoreman strike for one. Almost half of U.S. imports are impacted by the strike. If it lasts, the implications for our inflation expectations are called into question and the economy could come to a screeching halt. But the timing before the election gives them some leverage that the administration will apply pressure to resolve it quickly before damage is done, so hopefully it is not long lasting. Another headwind is the devastation caused by hurricane Helene. The human toll is not yet known, but the destruction of significant infrastructure is becoming apparent. For example, the I-40 is a major supply chain route that will take months to repair. Supply chains as we have learned can cause major disruptions to economy activity and are inflationary. If that wasn’t enough, yet another headwind as the situation in the middle east continues to escalate.
How does all of this impact the path for rates? Rates right now are priced based on the anticipated path of the economy and inflation over the next 24 months or so. Rates will change when that outlook changes. Weakening economic activity could help rates improve further from here, but the inflationary aspect of the supply chain issues could get in the way of that. Escalating concerns over the middle east could also help rates as bonds typically benefit during times of uncertainty. It is called ‘a flight to safety’ but this is usually a move that doesn’t last long term and is a knee jerk reaction to developing events.
Powell took some wind out of the market yesterday in a speech where he reiterated the Fed is not on a preset course and all but squashed the idea of another .50% rate cut this year. He suggested the cuts will be .25% moving forward and he believes the economy is strong and they will take the rate cuts slowly moving forward. A little change in his tune is how it reads to markets.
The first week of the month is always about the jobs data. It kicked off today with JOLTS that reported an increase in job openings at 8.040 million, a big jump from last month that was at 7.673 million. Sounds good on the headline but hiring rate fell from 3.5% to 3.3% lowest reading in 10 years (besides Covid). Also showed job quits falling to 1.9% lowest since 2015 (besides Covid). Both show weakness in employment despite the increase in openings that some think shows duplicate openings from a variety of sources. A lot of other important releases on employment will hit this week and Friday when we get the BLS reported data. Expectations are for 150k jobs to be added to the economy and unemployment rate to hold at 4.2% Remembering that the July reading is what set off our improvement in rates, it will be a key event to watch even though it will be revised lower later LOL.
The technical indicators right now are strong to hold rates in the current range. This morning based on all the events mentioned above, we are at the better end of our rate range.
|
Loan Type |
Conventional 30 year |
Conventional 15 year |
FHA 30 year |
VA 30 Year |
|
Interest rate |
5.875% |
5.50% |
5.25% |
5.50% |
|
APR |
6.027%* |
5.668%* |
6.272%** |
5.615%*** |
LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)
RATES ARE CURRENT AS OF 10-01-2024. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE
*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935
**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, NO Loan Origination Fee , $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.