Rate Lock Advisory

Wednesday, September 20th

WEDNESDAY’S AFTERNOON UPDATE:
This week’s FOMC meeting has adjourned with no change to key short-term interest rates. That was expected. What has had a noticeable influence on the markets this afternoon was the fact that 12 out of the 16 voting Fed members still feel a third rate hike will be before the end of the year. In addition, 11 of the 16 predict three more rate increases will be made in 2018. That indicates the Fed is still confident in the economy, even though they have acknowledged that inflation remains below their 2.0% preference. This appears to have surprised analysts and market participants.

9/32


Bonds


30 yr - 2.27%

16


Dow


22,354

32


NASDAQ


6,428

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High


Negative


Federal Open Market Committee (FOMC) Statement

Also driving this afternoon’s trading is the announcement that the Fed will begin unwinding their massive balance sheet next month by reducing the amount of proceeds that are reinvested. They will be lowering that amount by up to $10 billion each month ($6 billion of Treasuries and $4 billion of mortgage bonds) in an effort to slowly reduce their holdings. Those caps rise starting next year to allow up to $50 billion each month ($30 billion and $20 billion respectively). This news, despite not being of much surprise as it was announced in June, is also pressuring bonds and mortgage rates.

Medium


Neutral


Federal Open Market Committee (FOMC) Statement

Overall, the Fed appears to remain confident in the U.S. economy and actually raised its GDP prediction from 2.2% to 2.4%. They said inflation is likely to temporarily move higher as a result of hurricane-related prices, but expects longer-term inflation to remain near 1.6%. Fed Chair Janet Yellen is speaking now, but has not said anything yet that we did not see in the post-meeting statement.

Medium


Negative


Federal Reserve Statement

Bonds have reacted negatively to this afternoon’s events, pushing the 10-year yield up to 2.28% from 2.23% just before the announcement. Stocks have bounced around a little, but are not far off from the pre-adjournment levels. The Dow is currently down 16 points while the Nasdaq is down 32 points. The bond market is now down 9/32 (2.27%), which should cause an increase in mortgage rates of approximately .125 of a discount point for most lenders.

Medium


Positive


Existing Home Sales from National Assoc of Realtors

August's Existing Home Sales report was posted at 10:00 AM ET this morning. The National Association of Realtors announced a 1.7% decline in home resales last month. This was weaker than expected, hinting at a softening housing sector. However, the decline is being attributed to a 25% drop in Houston area sales, related to Hurricane Harvey.

Low


Unknown


Weekly Unemployment Claims (every Thursday)

There are two minor pieces of data being released tomorrow morning. The first is last week’s unemployment figures at 8:30 AM ET. They are expected to show that 310,000 new claims for unemployment benefits were filed last week, up from the previous week’s 284,000. The larger the number of claims, the better the news it is for bonds and mortgage rates because rising claims is a sign of a softening employment sector. However, this is only a weekly snapshot of the sector, so its influence on mortgage rates is often weak unless it shows a significant variance from forecasts.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.