Call it the rise of the Planet Automaton, or simply, lack of productivity but wage growth (and it has foxed economists) is sluggishly seen in the light of the low unemployment rate. This is the exact opposite of how the cookie is supposed to crumble in times of expansion.   

Federal spending (up by 8% for Fiscal ‘19’) has overrun an increase in revenue (up by 4%), leaving our country with a shade under a $1 trillion fiscal deficit. Never in the last 7 years has the budget gap been so wide.

The budget deficit will force the Trump administration to raise borrowing. Plans are on to borrow a $1 trillion from the Treasury for the second year in a row. Such heightened sales of long-term debt to keep the government’s deficit workable may work in the short run because those who hold the debt fully believe in the US’s power of repayment. But with time, as the demand for the US Treasury (under continued strain) sinks and the debt-holders begin to seek more returns for what they then take as a risky investment, interest rates may rise and a good deal.

Back to our weekly story…..

Mortgage Rates: a mixed story

This week’s Mortgage Banking Associations’ (MBA) weekly rate survey reveals an increase in mortgage rate across the board (with the exception of 5/1 ARM).

According to the MBA Weekly Survey: “The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.02 percent from 3.92 percent, with points increasing to 0.38 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week. ”

1 point in cost = 1% of the loan amount

“The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 3.96 percent from 3.90 percent, with points increasing to 0.30 from 0.23
(including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.”

“The average contract interest rate for 15-year fixed-rate mortgages increased to 3.39 percent from 3.32 percent, with points increasing to 0.35 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.”

“The average contract interest rate for 5/1 ARMs decreased to 3.29 percent from 3.37 percent, with points increasing to 0.35 from 0.23 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.”

Mortgage Rate Activity and Predictions

A majority of those surveyed by the Bankrate’s weekly survey of mortgage and economic experts, countrywide, expect the rates to remain unchanged for the coming week (24th October to 30th October). Out of those surveyed, 18% foresee a rise in rates while a mere 9% are putting their bets on a downtick. The remaining 73% predict an unchanged interest rate (with a maximum movement of two basis points either side).

My prediction is that rates will move higher this week, as quoted in the Bankrate report, “The mortgage rates have recently been volatile because of several geopolitical reasons most notably Brexit votes and the trade negotiations between the US and China. The ongoing impeachment proceedings only add to the drama and market volatility. I expect the trend to continue in the coming week. Favorable news on any of these fronts could push the rates slightly higher.”

The chart below, from Freddie Mac’s weekly mortgage survey, shows that the conforming rates for the week- 17th October to 23rd October-  are looking up ever so slightly, the uptick being  0.03% for 15Y fixed and 0.06% for 30Y fixed.

Freddie Mac’s weekly mortgage survey noted, “The outlook for a favorable resolution to the trade dispute between the U.S. and China is still unclear, introducing some volatility into financial markets and the benchmark 10-year Treasury yield. Mortgage rates are following suit but are at near historic lows, while mortgage applications to purchase a home remain higher year over year.”

Mortgage Rate Lock Advice

The chanciness of our present economy is such that what we are signing for, plainly spoken, is a pig in a poke. Be that as it may, I am convinced that locking is your best bet if you are closing anytime soon.