No Real Ceiling in Sight for Rates, Certainly No Basement

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If you were looking for something to be thankful for heading into the holiday dedicated to that act…look somewhere else besides the mortgage industry. It’s going to be a long time before we’ll be able to see if rates will head back to the glorious 3.625 percent range that we experienced for much of the summer.

Rates have “settled” at around 4.125 percent for the average lender, although there’s a decent margin of difference in both directions. We put “settled” in quotation marks because this is as close to consistency that we can get at the moment, however it’s nowhere near the stasis we got during those relaxing days of summer.

If we’re going to continue the holiday theme, we can’t put a ceiling on rates rising. So a mortgage for Christmas might have just gotten less affordable, and don’t count on Martin Luther King Jr. Day either.

In short, there are only two things that can send mortgage rates back down at the moment, and only one of them is really conceivable at the moment: Donald Trump announcing a policy plan that makes lower rates conceivable, much less reasonable. This isn’t a political statement on our part regarding how he’ll run the office: It’s the honest truth. We don’t have extensive knowledge on what his financial policy will be and, even if he has made statements on these things, we’ll need to wait until he takes office before the markets make any decisions based on them.

The markets don’t like surprises (and Trump’s election was the ultimate surprise), and they’ll behave conservatively to protect their interests. Conservatively, such as raising mortgage rates nearly a quarter of a percent across two weeks.

The other of the two things that could send rates down? A shock in the market. And let’s be honest: Shocks in the market, such as a terrorist attack or a Deepwater Horizon, are going to send rates up before they go down. The only real possibility (and we only say “real” in the loosest sense) is if the Federal Board decides to push down the Federal Interest Rate during their December meeting. They won’t.

And the economic implications of Brexit aren’t going to be resolved before February either.

Anyway, Happy Thanksgiving!