Mortgage Rates & Market Commentary 12/5/15

Mortgage bond prices finished the week lower which pushed rates a bit higher. Trading started on a positive note early in the week amid some weak data. The ISM index was 48.6 versus the expected 50.5 reading. Productivity in the third quarter rose 2.2% as expected. Rates were higher mid-week in response to stronger than expected employment data. ADP payrolls, an indication of the health of private sector employment, showed the US economy added 217,000 jobs in November. Economists expected the creation of 190,000 jobs. The European Central Bank cut the deposit rate banks receive as expected but some wanted a larger cut. The jobs component of the employment report was better than expected. Mortgage interest rates finished the week worse by approximately .125%. Rate Hike Likely The probability of a Fed rate hike this month increased after the stronger than expected employment results last Friday and ADP data earlier in the week. Payrolls increased 211,000 versus an expected increase of 196,000. Analysts now place the odds that the Fed will raise rates at their December 16th meeting at around 80%. If this occurs, it will be the first rate hike since June 2006 and will signal a turning point for interest rates. The bad news is that the markets have generally priced in the event as traders positioned themselves ahead of the meeting and rates are higher as a result. The good news is that most analysts predict the Fed will hold after the initial rate increase. Fed Chair Yellen stated, "Of course, even after the initial increase in the federal funds rate, monetary policy will remain accommodative." This provides some hope that rates can remain relatively low despite the upward trend. With so much uncertainty now is a great time to take advantage of historically low mortgage interest rates to avoid future market volatility.