October began with the greatest mortgage rate increase since the Presidential Election and over the month rates rose by about another 1/8th of a percent which was to be expected. Perhaps more interesting, rate volatility rose during October and we had several days with multiple price changes. This makes it extremely challenging for borrowers to take advantage of the best rates when the target is constantly moving. We always advise borrowers to make sure they are working with mortgage professionals who truly understand the interest rate markets instead of the lenders who spend the most money on advertising.
Mortgage bond markets were not the only volatile markets this month. Both the stock and bond markets have been equally volatile and the S&P 500 dropped as much as 10% from its September all time highs to end the month down about 7%. Exceptionally strong employment and wage numbers continue to be released and have been a sign of healthy markets. The Fed used stronger language in October indicating that accommodative monetary policies will continue to be restricted, but during their October meeting rates were left unchanged. It is still highly likely that the Fed will raise rates in December, but there are other factors that the Fed will have to consider. The US dollar continues to strengthen against other world currencies, which is good news for mortgage rates. The Fed raising interest rates would only strengthen the dollar further and drive down inflation. This is very important for the Fed to consider before ratcheting rates up further.
Mountain State Financial Group believes that the biggest rate increases in the near term may be behind us for now and we could see more moderate increases with less volatility. If you would like to know more, please click here to read more or contact us directly.