Rate Lock Advisory

Wednesday, June 17th

WEDNESDAY AFTERNOON’S UPDATE:

This week’s FOMC meeting has adjourned with an announcement that no change to key short-term interest rates were made for the fourth consecutive meeting, as was widely predicted. However, the post-meeting statement and the Fed’s dot-plot that lists each member’s predictions of where rates will be in the future clearly show there is a growing consensus that the next move will be a rate hike instead of another rate cut. This is bad news for bonds and mortgage rates because it signals their concern about inflation. When inflation is stronger, long-term securities such as mortgage bonds become less appealing to investors, leading to higher rates for mortgage shoppers.

8/32

Bonds

30 yr - 4.47%

210

Dow

51,589

172

NASDAQ

26,196

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Neutral

Misc Fed

The Fed’s revised economic projections were a mixed bag for the bond market. They raised their inflation expectations from 2.7% to 3.6% with their core inflation estimates revised higher also. They expect the economy to grow at a 2.2% annual pace instead of the previous estimate of 2.4%. Lastly, they see the U.S. unemployment rate holding at the current rate of 4.3%.

Medium

Negative

None

Overall, the markets have responded negatively to the news with the Dow now showing a 210 point loss and the Nasdaq down 172 points after both were in positive ground this morning. The bond market is following suit, currently down 8/32 (4.47%). This is enough of a move to likely cause an intraday revision to mortgage rates by approximately .250 of a discount point. If you haven’t seen a revision yet, you will probably see it soon.

High

Negative

Retail Sales

This morning’s sole relevant economic data was May's Retail Sales report at 8:30 AM ET. It revealed a 0.9% jump in sales while a secondary reading that excludes more costly and volatile auto transactions rose 0.8%. Both readings were well above expectations of up 0.5% and 0.6% respectively, meaning consumers spent much more than anticipated last month. Because that category makes up over two-thirds of the U.S. economy, this data is bad news for bonds and mortgage rates.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow brings us the release of two minor economic releases. First will be last week’s unemployment figures at 8:30 AM ET. They are expected to show 226,000 new claims for jobless benefits were filed last week. This would be a decline from the previous week’s announced 229,000 initial filings. Declining claims are a sign of strength in the employment sector, so an unexpected increase would be favorable for mortgage rates.

Medium

Unknown

Leading Economic Indicators (LEI) from the Conference Board

The last report of the week will be May's Leading Economic Indicators (LEI) at 10:00 AM ET tomorrow. The LEI is a Conference Board release that attempts to predict economic activity over the next several months. Since it comes from a business research group and not a governmental agency, its impact on rates is often minimal. Current forecasts show a 0.1% rise in the indicators. A decline would be good news for the bond and mortgage markets.

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... Float 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.