Weekly Mortgage Rate Update- 11-14-2023

Mortgage rates are improving this morning after the CPI inflation report came in lower than expectations.  The path seems to be set for lower rates ahead.

CPI came in at 0.0 monthly increase. We finally have a month where inflation did not increase. Core CPI, which excludes food and energy did rise by 0.2% over last month, but this was also lower than expectations of 0.3%.  Year over year Core CPI is at 4.0%. This is the lowest since September 2021.  Core CPI is still double the inflation rate of 2.0% that the Fed wants, but markets see light at the end of the tunnel now. The economy and inflation are slowing, which could cause the Fed to have to reverse course on its monetary policy sooner than previously thought. Most pointing to Spring 2024 for the first Fed rate cut.

We have been discussing for weeks that it’s not just Fed policy now that is driving rates. Last week, rates worsened on Thursday after a very weak 30 year bond auction- a result of less appetite/increasing supply for our debt. Then late Friday afternoon Moody’s downgraded US credit from stable to negative.  You may recall 3 months ago Fitch downgraded US credit rating from AAA to AA+ and rates began to move higher after that call.  We haven’t seen any major market moves on Moody’s call, but it is noteworthy and speaks to the bond market issues that have been simmering.  Like Fitch, Moody’s pointed to the lack of fiscal responsibility with government spending and growing deficits.  Friday is the new deadline for congress to pass a spending bill. It would restore confidence if something resembling a budget gets through. If nothing changes in the bond market sentiment, this could end up throttling just how much mortgage rates improve -even if Fed policy shifts.

Taking a look at the technical side of things.  At this writing, the 10 year is currently 4.45% which is below the extremely strong resistance level of 4.50% that has been holding rates higher.  We have broken through that resistance.  If it holds and closes below, we expect current pricing will hold and may open the door for more improvement in rates.  

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