Markets are starting to see some inflation

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Published Date 11/30/2017

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Higher

Mortgage rates are moving sideways so far today. The MBS market worsened by -18 bps yesterday. This was enough to worsen mortgage rates or fees. The market experienced high volatility yesterday.

Today's Rate Forecast: Neutral

Personal Income and Outlays: Wages were higher than expected as October's Personal Income increased by another 0.4% vs est of 0.3%. Personal Spending matched expectations with a monthly gain of 0.3%. The spread between the rising incomes and spending means that we saw a 1% increased in the personal savings rate.

The Fed's key measure of inflation, PCE on a YOY basis increased by 1.6% which was a little higher than expectations of 1.5%. Plus September was revised upward from 1.6% to 1.7%. Still below the Fed's target rate of 2.0% but moving closer. Core PCE YOY hit 1.4% which matched expectations.

Jobs: Initial Weekly Jobless Claims hit 238K vs est of 240K. The more closely watched 4-week moving average finally popped back over the 240K mark with a 242,250 reading.

Manufacturing: November Chicago PMI hit 63.9 vs est of 63.0. Any reading above 50 is strong, and readings above 60.0 are very, very very strong. This marks the 3rd straight month with a reading above 60.0 which has not happened since 2010.

Fed: Cleveland Fed President Loretta Mester (nonvoting in December, but is a voting member staring in Jan) will moderate and speak at a fintech conference today. Dallas Fed President Robert Kaplan (voting member in December, a nonvoting member in 2018) will speak at a real estate council this afternoon.

China: Manufacturing PMI was stronger than expected (51.8 vs est of 51.4) and Services improved from 54.3 to 54.8 Japan: Construction Orders had a huge rebound from September's reading of -11.6 to October's +6.7. We will get their Unemployment Rate and CPI later tonight.

Eurozone: Unemployment Rate dropped to 8.8% vs est of 8.9%.

Today's Potential Rate Volatility: Neutral

Mortgage rate volatility is still a real possibility with tax reform hanging out there. Stock market is betting that something will get done, but uncertainty in the market is still helping to keep rates in a tight range.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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