Market Comment
Mortgage bond prices finished the week sharply higher which pushed rates lower. Most of the data was rate friendly. Signs that the economy remained wobbly pushed back expectations of a Fed rate increase. PCE inflation was unchanged versus the expected 0.1% increase. ADP Employment increased 200K as expected. The ISM Index was lower than expected. Unemployment came in at 5.1% as expected. Non-farm Payrolls rose 142K versus the expected 203K increase. The significant miss sent MBS prices higher and rates lower. Average hourly earnings were unchanged versus the expected 0.2% increase. Mortgage interest rates finished the week better by about 7/8 of a discount point.
A Sure Thing While nobody can accurately predict what the future holds for mortgage interest rates, the fact remains that they are historically low despite volatility this year. It is difficult to justify the risk in floating when the excellent rates currently available are a sure thing. Timing is one of the most important factors in success. Unfortunately, knowing the perfect time to lock in a loan is impossible until after the fact. While analysts constantly try to predict the future, the bottom line is they continually fall short in terms of accuracy. Recent history is a testament to this. At the beginning of the year analysts overwhelming predicted the Fed would raise rates in the summer. Fed officials even came out with future rate hike warnings. Despite projections and warnings mortgage rates fell in January, rose in February, fell in March, and then marched higher again into the middle of summer only to fall the past few months as the Fed delayed their expected interest rate increase. Rates are historically very low at this point but not as low as they were at the beginning of the year. The movements over the past 9 months show the challenge of making predictions. The good news is that the current low interest rates are here now. A cautious approach is wise to take advantage of rates at these levels.
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