Weekly Mortgage Rate Update- 12-26-23

Mortgage rates remain unchanged from last week as we coast into the new year.

The only notable news last week was Friday’s PCE (Personal Consumption Expenditures) This is the report that the Fed uses to determine the rate of inflation. The other inflation reports are just indicators of what this report might show.  Inflation decreased in November with the month over month -0.1%.  Remember inflation has only slowed until now, this is the first actual decrease since 2020.  We still have well over 20% of cumulative price increases since 2020.  The Core PCE excludes food and energy came in at 3.2%.  Progress has been made, in 2023 we started the year at 6.4% PCE, we are getting closer to the Fed target rate of 2% inflation.

Consider this, the Fed isn’t looking for prices to go back to pre-covid.  We will still have the increases accrued over the past 3 years, plus the target of 2% per year inflation. By the end of the decade if inflation goes back to 2%a year, we will have price increases of 30% in just a decade. Makes locking in a home mortgage payment and purchase for 30 years comforting.  Real estate truly is a hedge against inflation.

All of this was slightly better than expected news but mortgage rates didn’t improve Friday because countering this was that the Personal income increased 0.4% which is double the pace of October (income increases are inflationary) Personal spending also rose 2 times higher than October.  Durable good orders which show future orders placed came in 5 times higher than expected.  All this points to strong employment and a resilient economy, even at current rates.  Leaves a question of just how soon the Fed will cut?  Many still betting on March.

The holidays have slowed activity in bond markets and there is no real news this week to anticipate.  Happy New Year! 

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.