Weekly Mortgage Rate Update- 1-14-2025
With a heavy heart
I came back from my vacation thru LAX the night the fires started. It was terrifying to witness how fragile our world is and how quickly things that seem so permanent can be gone. There is nothing more important right now than bringing the fires and loss to an end. In the weeks ahead we will no doubt need to look at the impact the costliest wildfire in our history will have on not only our industry, but the whole economy. Right now, we just pray for an end to it.
Rates are on the rise
Rates have been steadily rising the past 4 weeks. The rise is the result of a recalibration on the economic outlook. Currently there is zero concern of a recession and the labor market and the economy are stronger than previously expected. It is also clear that the battle with inflation has not ended, and inflation forecasts have increased recently. Both a strong economy and inflation are a recipe for higher rates.
Strong jobs data pushed rates higher
Last Friday, we took a big hit to rates as the monthly non-farm payroll numbers showed a whopping 256k jobs added vs 160k expected. The unemployment rate dropped from 4.2% to 4.1%. Whether you believe this paints an accurate picture or not, the market reacted strongly with rates rising Friday. The negative aspects of the report were that those on unemployment are staying on longer, signaling its harder to find a new job. Most of the job gains were for those under 24 years old, which leads one to believe the additions were for seasonal/part-time holiday work. Interestingly, the Wall Street Journal published an article this morning that shows 22% of job postings are not real. However skewed the data, overall business optimism is up and labor appears to be doing “ok”.
The message from the Fed shows a definitive shift in outlook
The Fed has also been clear in its messaging to markets since the December meeting where they went ahead and cut the final .25% on the Fed rate for 2024 and signaled that the rate cutting cycle is on pause now. “Kansas Fed President Schmid said last week “ My guess is rates are closer to the longer run level now…the strength of the economy allows us to be patient” Markets are pricing in 0-1 rate cuts in 2025 at present. For perspective, 2 months ago at least 3 were expected. If the Fed thinks we are close to the neutral rate, it is quite possible that we are defining a new normal for rates that will be higher than we became used to in previous decades.
The bottom line- Recession concerns are gone and inflation fears are growing
There is a lot that can be said on the reasons rates moved back up. The growing deficit is one big reason- but that has been a known issue. The change and move back up in rates recently is likely due to the pricing out of a recession and pricing in higher inflation than previously thought.
Not a fan of 2025 so far
We have a lot of news this week, namely inflation data with CPI on Wednesday. This morning PPI (Producers Price Index) which shows the costs that go into making goods came in better than expected for the month, but is still too high with core annual pace at 3.5%. We will have to see if this lower monthly reading flows into CPI (Consumer Price Index) tomorrow, as this is report that will move the needle on rates. Technically speaking rates have been on a trajectory to the highs we had in 2023 and if we get a stronger inflation reading tomorrow, we will move higher.
Today’s Rates
Loan Type |
Conventional 30 year |
JUMBO 30 Year |
FHA 30 year |
VA 30 Year |
Interest rate |
7.125% |
7.375% |
6.625% |
6.625% |
APR |
7.275%* |
7.527%** |
7.631%*** |
6.778%**** |
LICENSED BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSE A division of TYKY (DRE #01919683) (NMLS LICENSE #257773)
RATES ARE CURRENT AS OF 1-14-2025. SUBJECT TO BORROWER APPROVAL, FICO SCORE, LTV AND PROPERTY TYPE
*APR IS BASED ON ESTIMATED FINANCE CHARGES OF $6935
**APR BASED ON ESTIMATED FINANCE CHARGES OF $16,430
***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, $1095 PROCESSING AND $0 UNDERWRITING
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.