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By G. Steven Bray
Mortgage rates are finally catching a break this week despite recent positive economic data. The improvement also comes despite the prevailing wisdom in the popular press that the election of Trump has somehow rubbed the magic inflation bottle, and prices and rates are going to roar higher in coming months.
I think the sell-off in the bond market and resultant increase in rates was a bit overdone, and I suspect the numerous uncertainties that remain in the world will keep a lid on US rates in the new year.
One of those uncertainties, a constitutional referendum in Italy, will be resolved this weekend. It appears now that the referendum will fail, and talking heads have opined that this could lead to Italy leaving the European Union. Probably not, but a no-vote could lead to another silly season like we had after the Brexit vote when rates dropped nicely.
In the US, we have a jobs report this Fri. I don’t think the jobs number will matter much unless it really misses expectations. What will interest me more is the wage inflation number. Wage inflation shot up a couple months ago. If it bests expectations again, it will give the inflation genie more power.
I think floating your rate this week is reasonable, but it’s also risky. Prevailing sentiment still seems to favor higher rates even if fundamentals don’t support them. Choose a bail-out point at which you’ll lock if rates start to zip higher again.