Rate update: Fed readies a Sep rate hike

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Fed readies a Sep rate hike
Aug 302016
 

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By G. Steven Bray

The Fed spoke last Fri, and it seems like no one cared. Fed Head Yellen said the case for raising short term interest rates is stronger. That was followed by two other Fed officials who said the case was compelling, and markets should be prepared for a Sep rate hike. The market reaction was quick and negative, and interest rates moved higher. That was predictable. However, yesterday, rates slipped back into that familiar range of the last couple months. That leaves me scratching my head.

It’s possible markets already have priced in a Sep rate hike. The Fed has been hinting at it for a while, and US economic data, especially consumer data, has been positive the last couple months. It’s possible, but I doubt it.

It’s possible markets believed Yellen and friends didn’t break any new ground, and they’re waiting for this week’s jobs report to give them direction. Fed officials said a rate hike depends on continued positive economic data. But I suggest it would take a pretty disappointing jobs report to sway the Fed. Several Fed officials let slip that 150k jobs would be plenty. The market consensus is last month produced 180k jobs.

Finally, it’s possible that month-end forces are keeping a lid on rates for the moment. If that’s true, rates could rise heading into the end of the week.

Regardless, I would suggest a defensive posture at this point. Rates still are close to their all-time lows. If you choose to float your rate, choose a bail-out point when you’ll lock. When rates start moving up, they may not head down again for a while.

Rate update: Are we nearing Dodge City yet?

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Aug 232016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Mortgage rates have moved from riding the range to a long, slow cattle drive. Rates barely budged again last week, and this week is shaping up to be similar – at least until Friday.

Federal Reserve governors are meeting this week in Jackson Hole, WY for a symposium on monetary policy. The symposium includes not just the Fed, but also finance ministers, academics, and financial market participants from around the world. Fri is important in that Fed head Yellen is scheduled to speak. In the past, Fed chairmen have used the speech to provide a less cloudy view of the Fed’s policy intentions. Many market analysts are expecting Yellen to signal whether the Fed will raise short-term rates at its Sep meeting.

Personally, I’m not sure that will happen. Given the kind of leadership she’s demonstrated, I think it’s at least as likely that she’ll hedge – “a rate hike is data dependent” and the like.

If her speech is more hawkish suggesting a Sep rate hike is on the table, I expect mortgage rates will bounce higher. While short-term rates, the ones the Fed controls, don’t directly affect mortgage rates, the knee-jerk market movement will push all rates higher, at least temporarily. I say temporarily because longer term rates like mortgage rates are more interested in the prospects for inflation and economic growth. The direction of both of those still is in doubt.

The undisclosed cost of trended credit data

 Credit Scoring  Comments Off on The undisclosed cost of trended credit data
Aug 222016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

You may have heard that lenders are going to start using credit reports with “trended data.” Credit bureaus claim it will increase the number of borrowers with excellent credit.

Currently, your credit report is a snapshot in time of your credit usage. The report shows your current account balances, limits, and minimum payments. A trended credit report shows how those amounts have varied over the last two years. Thus, it augments usage with insights into your credit habits. Do you pay off your credit cards each month? Do you pay more than the minimum balance? A trended report will reveal these habits.

What you may not have heard is how trended data reports will effect your closing costs. The credit bureaus are charging more for all the extra data, and that cost gets passed on to you, the loan applicant. It appears the credit report fees you see on your closing statement will jump by about $10.

Rate update: What will break the current range?

 Interest Rates, Residential Mortgage  Comments Off on Rate update: What will break the current range?
Aug 152016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Last Friday’s economic data was scary enough to push rates down to 1-month lows, but that’s just the bottom of the same range they been riding for the last few months. The problem is the economic data is conflicting. Jobs and housing to a large degree seem healthy, but spending and investment are anemic, and inflation is quite low despite all the Fed’s stimulus actions. In this environment, rates lack motivation to move one way or the other. That said, we could be just one big data point away from a move that escapes the range.

That seems unlikely this week. The most significant economic event is the release of the Fed meeting minutes. I don’t expect the minutes will contain any surprises, but it’s always possible market analysts will parse some phrase to suggest the Fed’s future course of action.

At some point the range will be broken, even if only temporarily. Given our closeness to all-time lows, and given the strength of the job market, a break higher seems more likely than a break lower. Locking when rates are at the bottom of the current range is a logical choice. If you choose to float, choose a bail-out point. If rates start to move up, you could lose ground quickly.

Rate update: Glut of bonds could pressure mortgage rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Glut of bonds could pressure mortgage rates
Aug 092016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Last week’s jobs report was another strong one, and mortgage rates responded as expected – quickly rising about an eighth of a point. But even with the rise, we’re still in the same range we’ve been in for the past several months, and rates have leveled out again to start the week.

The question now is will the jobs report give the Federal Reserve cover to start raising interest rates again at its Sep meeting. Interestingly, markets don’t think so. They might be right given that the Fed should be hesitant to do anything that could be perceived as influencing the election. Moreover, the economy still doesn’t seem to be running on all cylinders, and the Fed has to consider the backdrop of a weak global economy.

This week looks to be fairly quiet for rates. Not only are a lot of traders on holiday, but the only significant economic data is Fri’s retail sales report. The biggest source of rate pressure this week may be “supply.” The markets expect to see a lot of corporate bond issuance this week, and the Treasury has 3 scheduled auctions. It’s Econ 101. When you have excess bond supply, rates tend to rise.

Rate update: Will jobs report send rates to record lows?

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Will jobs report send rates to record lows?
Aug 012016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Just as markets were getting comfortable with the idea of a stronger US economy, last week’s 2nd quarter GDP report was a bucket of cold water. The economy grew at an anemic 1% for the first half of this year. In response, bond markets rallied and mortgage rates dropped.

Once again, we’re within reach of record lows. Whether we challenge them in the near term probably depends on this week’s jobs report. Remember that last month’s report was really strong and started a conversation that maybe the economy was heading up. A stronger than expected inflation report provided additional cover for statements from Fed governors that further rate hikes this year seem appropriate.

Another strong jobs report this week won’t guarantee a rate hike, but it’s hard to argue that a stronger job market won’t result in higher growth in the second half of this year. Stronger second half growth is probably just what the Fed needs to start raising short-term rates again, and that will put pressure on mortgage rates. A weaker report could send rates to new record lows.

For now, we’re likely to see the usual push and pull of market forces, like today’s huge corporate bond issue that pushed rates up a little, but absent something extraordinary, rates are likely to hang in the current range until Friday’s jobs report.