Weekly Mortgage Rate Update- 9-19-2023
Mortgage rates moved up again last week as the outlook gets a little bleaker on rising inflation and as a soft landing seems a little less likely.
Nick Timiraos, who is commonly referred to as the Fed’s mouthpiece- wrote this week in the Wall Street Journal-
“Almost every hard landing looks at first like a soft landing. What's standing in the way of a soft landing now:
-The Fed staying too high for too long
-A too-hot economy
-A rise in oil prices
-A financial market rupture”
Last week CPI increased, once again not decreasing month over month. PPI is the Producer Price Index- which gives a clue into future inflation that has not worked its way to the consumer yet. That showed an increase of almost double expectations month over month at .7% vs .4% expected.
Adding more inflationary pressure- retail sales shot up to .6% vs expectations of .2%. Three times higher than expected. Most of the increase in inflation is due to rising oil prices which has taken center stage lately.
Inflation kills the rate of return on bonds which pushes rates higher. The bell weather 10-year note is now testing a key level of 4.35%, if it breaks thru this, we will have higher long term rates ( Mortgage rates)
The spread between the 10 year and the 30-year mortgage has been averaging about 300 bps. So, a 4.35% 10 year is about 7.35% average mortgage rate. As of this writing mid-day, the 10 year is at 4.37% but needs to close at this to be a real factor.
Probably its testing the higher ranges because tomorrow the FOMC concludes its meeting, and we get the interest rate and policy statement. Tomorrow afternoon will be key to see the reaction in markets.
Today’s mortgage rates probably reflect the hedging ahead of tomorrow. The best we can hope for at the moment is a slight improvement in rates tomorrow afternoon if the outlook doesn’t show a more hawkish Fed.
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