Rate Lock Advisory

Sunday, September 15th

This week is expected to be very active for the financial and mortgage markets. There are five monthly economic reports scheduled for release, one of which is considered to be highly important, along with a Treasury auction. In addition to the data, we also have an afternoon of Fed events midweek that have the potential to cause a significant move in rates. It starts off light with nothing scheduled tomorrow that we need to be concerned with but gets busy quickly after.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High

Unknown

Retail Sales

First on the calendar is the highly important Retail Sales data at 8:30 AM ET Tuesday that measures consumer level sales. This data is so important to the markets because consumer spending makes up over two-thirds of the U.S. economy. If spending is strong, overall economic growth is likely to be stronger, making bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably, pushing mortgage rates lower. Current forecasts show a 0.3% increase in sales. Good news for the bond market and mortgage pricing would be a decline.

Medium

Unknown

Industrial Production

Next up is August’s Industrial Production data at 9:15 AM ET Tuesday. It will give us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting to see no change from July's level, meaning that manufacturing activity was flat last month. A large increase in production would be negative for bonds and mortgage rates as it would be a sign of economic strength. A decline would be favorable for mortgage shoppers.

Medium

Unknown

Treasury Auctions (5,7,10,20,30 year)

Tuesday also has a 20-year Treasury Bond auction that may affect rates during early afternoon trading. If the sale is met with a strong demand from investors, particularly international buyers, bond prices may rise and mortgage rates could revise lower after results are announced at 1:00 PM ET. On the other hand, a lackluster interest in the securities may create selling in the broader bond market and lead to a slight upward revision to mortgage rates.

Low

Unknown

Housing Starts (New Home Construction)

Wednesday’s activities will begin with August's Housing Starts report at 8:30 AM ET. This report will probably not have a heavy impact on the bond market or mortgage rates. It gives us a sign of housing sector strength and future mortgage credit demand by tracking new home groundbreakings but is usually considered to be of low importance. It is expected to show an increase in new home starts from July, pointing to strength in the new home portion of the housing sector. We need to see a significant surprise in this data for it to have a noticeable influence on mortgage rates.

High

Unknown

Federal Open Market Committee (FOMC) Statement

The main focus Wednesday will be on the much-anticipated FOMC meeting adjournment at 2:00 PM ET and the related events that will follow. This is where the Fed will likely make their first cut to key short-term interest rates since March 2020. There is little debate whether or not Chairman Powell and friends will make that cut this week as inflation seems to be trending lower and concerns about the employment sector rise. The consensus is they will make a quart-point reduction to the Federal Funds and Discount rates, but some analysts feel a half-point move is a possibility.

High

Unknown

Misc Fed

Since there is an overwhelming consensus that a rate cut is coming, it is likely that the markets have a quarter-point reduction built into current pricing. If the Fed makes a stronger half-point cut, we should see bonds rally and mortgage rates move noticeably lower.

Assuming there is no surprise in the size of the rate cut, traders will be looking at the other events to form an opinion on what the Fed’s future moves will be. Many market participants are expecting a total of .750 in rate cuts before the end of the year. If their first move is .250 this week, it would leave .500 over the remaining two FOMC meetings (November and December). If the revised economic projections that are part of this meeting and what is commonly called the dot-plot show rate cuts totaling more than that amount, the bond market should rally. However, signs that only one more .250 reduction is coming before the end of the year could lead to bond selling and an upward move in mortgage rates.

High

Unknown

Misc Fed

The meeting will adjourn, and their statement will be released at 2:00 PM ET, as will the revised economic projections. Chairman Powell will host a press conference at 2:30 PM ET. Anything other than a quarter point move with confirmation of another at each of the next two meetings should cause a big move in the markets and mortgage pricing Wednesday afternoon.

Medium

Unknown

Existing Home Sales from National Assoc of Realtors

Closing out this week’s economic calendar will be two moderately important reports late Thursday morning. August’s Existing Home Sales report will come from the National Association of Realtors. They are expected to announce a decline in home resales, pointing to weakness in the housing sector. Good news for mortgage rates would be a large drop in sales.

Medium

Unknown

Leading Economic Indicators (LEI) from the Conference Board

The Conference Board will post their Leading Economic Indicators (LEI) for August at 10:00 AM ET also. This index attempts to predict economic activity over the next three to six months. Forecasts have it showing a 0.4% decline, meaning the indicators are pointing toward weaker economic activity. The larger the decline, the better the news for mortgage pricing.

Overall, Wednesday is the most important day of the week for rates due to the FOMC events. We may also see a sizable change in rates after Tuesday’s sales data. The calmest day could be Friday unless a big bond rally or sell-off Thursday afternoon carries into Friday’s morning session. With so much going on this week, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.