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Mortgage Market in Review – November 2, 2015

Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Trading was narrow and uneventful up until the Fed meeting Wednesday afternoon (see article below). New home sales were 468K versus the expected 550K. Durable goods orders fell 1.2% as expected. Consumer confidence was a weaker than expected 97.6. Analysts looked for a reading of 102.8. Q3 Gross domestic product rose 1.5% versus the expected 1.6% increase. Weekly jobless claims were 260K versus the expected 265K which was not rate friendly. PCE core inflation rose a lower than expected 0.1%. Consumer Sentiment was 90.0 versus the expected 92.5 mark. Mortgage interest rates finished the week worse by about 3/8 of a discount point.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
ISM Index Monday, Nov. 2,
10:00 am, et
50.8 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Construction Spending Monday, Nov. 2,
10:00 am, et
Up 0.8% Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
Factory Orders Tuesday, Nov. 3,
10:00 am, et
Down 0.8% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
ADP Employment Wednesday, Nov. 4,
8:30 am, et
212K Important. An indication of employment. Weakness may bring lower rates.
Trade Data Wednesday, Nov. 4,
8:30 am, et
$46.4B deficit Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Weekly Jobless Claims Thursday, Nov. 5,
8:30 am, et
258K Important. An indication of employment. Higher claims may result in lower rates.
Preliminary Q3 Productivity Thursday, Nov. 5,
8:30 am, et
Up 3.3% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Employment Friday, Nov. 6,
8:30 am, et
5.1%,
Payrolls +152K
Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Consumer Credit Friday, Nov. 6,
3:00 pm, et
$14.95B Low importance. A significantly large increase may lead to lower mortgage interest rates.

Rate Hike Back in Focus

Market sentiment regarding a future Fed rate hike changed quickly last week in response to the Fed meeting. The Fed kept rates unchanged however indicated, “Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace.” The vote was 9 to 1. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at that meeting.

Odds makers had the chance of a Fed rate hike in December at around 33% prior to the Fed meeting. That afternoon the odds increased dramatically to around 47%. The Fed is clear that they will eventually need to raise rates. The timing of the hike remains the biggest uncertainty. Now is a great time to take advantage of historically low mortgage interest rates to avoid future market volatility.


Copyright 2015. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.