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Political headlines were the main influence on mortgage rates this week and caused a great deal of volatility. Stronger than expected economic data also was a factor. The positive and negative news was
offsetting, however, and mortgage rates ended the week with little change.
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On Friday, it was reported that former National Security Advisor Michael Flynn would plead guilty to one charge and would cooperate fully with the Special Prosecutor. There is speculation that he will testify about President Trump. The resulting uncertainty caused investors to shift from riskier assets such as stocks to safer assets such as bonds, including mortgage-backed securities (MBS). The added demand for MBS was positive for mortgage rates.
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In recent weeks, signs of progress of tax reform have been viewed as negative for mortgage rates and good for stocks. This is because tax reform is expected to stimulate economic activity, which would raise the outlook for future inflation. On Tuesday, the Senate Finance Committee passed its tax reform plan, which was unfavorable for mortgage rates.
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A series of stronger than expected economic reports released this week also was negative for mortgage rates. Third quarter gross domestic product (GDP), the broadest measure of economic activity, was revised higher from 3.0% to 3.3%. The Consumer Confidence index jumped to the highest level since 2000.
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Sales of new homes in October rose 6.2% from September, reaching the highest level since 2007. One of the few pieces of good news for mortgage rates in the recent data was that current levels of inflation have been holding steady at low levels, as indicated by Thursday's reading for the core PCE price index.
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This week, the FHFA, the regulator for Fannie Mae and Freddie Mac, announced new conforming loan limits for 2018. The baseline limit, which affects most markets, will increase by 6.8% to $453,100. Loan limits in markets designated as "
high cost areas" will increase to $679,650.
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Looking ahead, investors will be focused on political news. News on Flynn, tax reform, and government funding could influence mortgage rates. To avoid a government shutdown on December 8, Congress must pass legislation to extend funding for the government. On the economic front, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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