October has been bad in the same way that our favorite horror movies are good: Nothing overt to panic about, yet certainly leaving the viewer on edge. Things could certainly be worse…an in-your-face event like what Britain experienced after the Brexit vote…however things have been a little spooky in the mortgage market. Rates are creeping higher. Not the kind of heights that threaten the average person’s ability to own a home, but enough that it creates suspense for something bigger coming.
Tuesday was a glimpse of sunlight in the dark room.
The day began with average rates that were at their highest in more than four months, however they began to relax a little in reaction to the positive bond market. Some lenders re-released rate sheets for the day, falling below the 3.625 percent we’ve been seeing.
That’s certainly not a drop back to the 3.4 to 3.5 percent rates we had for much of the Summer, and we’re certainly not out of the haunted house yet (horror references will continue, in line with Halloween season). But it is a change of pace for the month. It marks the first time during October that we’ve seen two consecutive days of positive (downward) movement.
Don’t count on it breaking the trend’s back…yet.
All of the chatter regarding disagreement on the Federal Reserve Board makes lenders inclined to believe the current rise in rates is just a buffer for the eventual rise in the Federal interest rate. And we could have a more dramatic shakeup before the end of the week because of the European Central Bank and the possibility that it may begin to taper its bond-buying program, which was the hot button issue two weeks ago.
“Ahead of the ECB there’s a little bit of lightening up of the euro,” said Richard Franulovich, senior currency strategist at Westpac Banking Corp. “There’s some focus on the possibility that (ECB President Mario) Draghi will push back very aggressively against recent talk of tapering.”
If tapering comes true, expect rates to move higher. If, as Franulovich suggests, the ECB denies such plans, we may see the downward trend continue. Don’t be too scared, for the time being.