Mortgage rates in January, 2020 are starting off the month near their recent lows as the Mortgage Backed Securities market and Treasury market improve during this first week of January. Last weeks Chicago PMI report, Consumer Confidence report and ISM Manufacturing report, which were all weaker than expected, really helped start the new month and the new year off on the right foot. Moving forward though we're going to have to see more bond friendly reports to maintain this stability. One thing mortgage rates don't like is volatile markets so ideally we would like to maintain the status quo heading into the BLS Employment report later this week.
Looking Ahead:
Here are some of the risks associated with mortgage rates moving forward:
- Economic news comes in stronger than the market expect
- New positive trade deal news with China
- If the European economy improves
- The Fed unexpectedly reverses course and becomes more hawkish
- Iran and the US reach a truce agreement
Are you getting the picture on what's bad for mortgage rates? Good news is bad news when it comes to Mortgage Backed Securities and consumer mortgage rates and the exact opposite is true; bad news is good news for MBS and mortgage rates. This is not a rule that happens 100% of the time but definitely more than 60% of the time.
The Most Important Risk To Watch:
80% to even 90% of the time the most important thing to watch, when you're thinking about mortgage rates, is the economy. As mentioned above, bad news about the economy is generally good news for mortgage rates. This week we'll have several reports that will give us a better idea of how well (or how not so well) the economy is doing. Expectations are for 160,000 non-farm payrolls to be created after the huge number that was reported last month (266,000).
I think tied for second is the potential for China trade deal news and news out of the Fed that they might take a more hawkish approach to the economy. I think these things are unlikely but you never know so its good to be prepared for as many possibilities as you can.
There is always an "unknown" risk in which you can't prepare for. That's why if you have the opportunity to lock in terms that make financial sense than don't hesitate. Trying to pinpoint the absolutely lowest rate is nearly impossible and those that do just get lucky. Mortgage rates move higher much fast than when they move lower so don't miss out on great terms just because your neighbor, who has done all of one or two loans his entire life, says interest rate might go down even more. Most people who wait to long end up paying a higher rate then what they could have originally locked in at.
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