Aloha! After a couple of weeks in Hawaii, I’m back to fill in what has changed!
MORTGAGE RATES
Mortgage rates are starting the week under pressure again as Treasury yields remain at 20 + year highs. The latest Freddie Mac average for a 30-year fixed mortgage is 7.28%, up from 7.03% the previous week.
The 10-year Treasury yield is trading at 5.3% this morning. Higher oil prices, inflation concerns, and uncertainty over future Fed policy continue to put pressure on the bond market.
THIS WEEK’S BIGGEST RATE MOVERS
Monday, October 5
• ISM Services Index
• S&P Global Services PMI
Tuesday, October 6
• U.S. Trade Balance
Wednesday, October 7
• Federal Reserve Meeting Minutes
• 10-Year Treasury Auction
The Fed minutes will give us a closer look at the discussions behind September’s rate decision and how concerned Fed officials remain about inflation.
Thursday, October 8
• Weekly Jobless Claims
• Wholesale Inventories
Friday, October 9
• University of Michigan Consumer Sentiment
• Consumer Inflation Expectations
Why It Matters
This is a lighter week for economic reports, but the bond market remains extremely sensitive to inflation.
If economic data stays strong or inflation expectations rise:
• Treasury yields could remain above 5%
• Mortgage rates could remain under pressure
• The Fed could keep rates higher for longer
If economic data weakens and inflation expectations improve:
• Bond markets could improve
• Treasury yields could move lower
• Mortgage rates could get some relief
Iran and the Bond Market
Iran continues to have a major impact on rates because of its effect on oil prices and inflation. There is some encouraging news on oil supply. Middle East crude exports recovered significantly during September and, on several days, actually exceeded pre-war levels. However, the situation remains very unstable. The Strait of Hormuz is still not fully reopened, and attacks on tankers have increased. Brent crude is trading around $102 per barrel.
U.S.–China Update
President Trump and Chinese President Xi Jinping made some progress during their recent meetings. The two countries agreed to move forward with new trade and investment discussions, including more favorable tariff treatment for approximately $30 billion of non-sensitive goods in each direction. For mortgage rates, this is mildly positive. Less trade tension reduces the risk of additional tariffs, which can increase the cost of imported goods and add to inflation. However, the impact on rates has been relatively small. Oil prices, inflation, government borrowing, and Fed policy are currently much bigger drivers of the 10-year Treasury and mortgage rates.
Federal Reserve Outlook
The Fed remains focused on controlling inflation, and this week’s meeting minutes should give markets a better idea of how policymakers are thinking about their next move. Higher energy prices remain a concern because they can work their way through the economy and make inflation more difficult to control. If the minutes suggest the Fed may need to keep policy tighter for longer, Treasury yields could remain elevated. A more cautious tone could provide some relief for the bond market.
Financing Spotlight: Omitting a Departing Residence
One of the challenges that a seller can have when they want to buy first and then sell is coming up with the money and/or qualifying for a mortgage with their existing home.
Here’s a financing strategy that can help a borrower qualify when purchasing a new primary residence while keeping their current home. With certain Non QM (Non Qualified Mortgage) loan programs, we can omit the departing residence payment from the borrower’s qualifying ratios rather than requiring them to qualify with both housing payments or obtain a lease agreement.
Basic requirements include:
• At least 20% equity in the departing residence
• Required reserves must be documented. 12-24 months
• The borrower is purchasing a new primary residence
• Additional program and underwriting guidelines apply
For more information on this program, reach out to me at 760-758-5370