Rates at Seven Year High

Mortgage interest rates continue to climb higher, as yields in the debt market approach levels not seen since 2011. The seven year high in mortgage interest rates seems to be a long time coming, as the highly anticipated climb finally hits. As we’ve talked about in past market updates, this move was needed to help allow the Fed to continue to push short term interest rates higher without causing the yield curve to invert. If this move in longer term rates continues, the likelihood of the Fed hiking rates for the 4th time in 2018 this December will increase. Odds are currently set at 60% for a December hike, but that will move higher as we see the long end of the yield curve advance.

Stocks are climbing higher again this morning, sending the Dow Jones Industrial Average to new all-time high levels. This is again creating a headwind for mortgage bonds which compete for the same investment dollars as stocks. As tariffs continue to hit the market, we can expect to see consumer prices climb higher. This will add inflationary pressure to the market, which will again push mortgage interest rates higher. Once again, not good news for the mortgage or housing industries.

There is no reason to float. We will maintain a locking bias.