Mortgage News Weekly 12/21/20

In This Issue…

A Look Into the Markets

Mortgage Market Guide Candlestick Chart

Economic Calendar for the Week of December 21 – December 25

A Look Into the Markets

“The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” … December 16, 2020, from the Fed’s Monetary Policy Statement.

This past week Stocks climbed to all-time highs, and rates were able to hold steady near all-time lows. The big news of the week was the Fed Meeting.

It is important to follow Fed activities as they are the most powerful central bank on the planet, and what they say and do can cause seismic shifts in the financial markets. The dual mandate of the Fed is to promote maximum employment and price stability (inflation). At the moment, unemployment is too high and inflation is too low, so the Fed said they are “committed to using its full range of tools to support the U.S. economy in this challenging time.” What the Fed didn’t say limited the improvement in both Stocks and rates.

When it came to the Federal Reserve’s Bond-buying program, the financial markets were hoping the Fed would “up” their Bond purchases to help further pin down long-term rates like mortgages, but this didn’t happen. Instead, the Fed said it will “continue to increase its holdings of Treasury securities by at least $80 billion per month and agency mortgage-backed securities by at least $40 billion per month. The Fed will continue this program until substantial further progress has been made toward the current pace to sustain the Committee’s maximum employment and price stability goals”.

The takeaway — the Fed will continue to purchase at least $120 billion worth of Bonds until we see unemployment sharply lower and inflation solidly higher. This means home loan rates should remain relatively low for a long time.

Bottom line: Even with the Fed Bond-buying, rates have ticked up slightly from the recent all-time lows. With vaccine distribution and more stimulus on the way, it may be difficult to see rates improve much, if at all. If you or someone you know would like to talk about the incredible opportunity, please contact me.

Looking Ahead

The financial markets may continue to bask in the glow of the Fed’s seemingly never-ending monetary support. As of this writing, we still do not have a fiscal stimulus bill out of Congress, but we expect and hope to see a plan before Christmas. There is an enormous amount of political pressure to get a stimulus bill passed. The Bond market has a holiday-shortened 1:00 p.m. ET close on Thursday, Dec. 24 and full market closure on Christmas, Friday.

Mortgage Market Guide Candlestick Chart

Mortgage-backed securities are what determine home loan rates. The chart below is the Fannie Mae 30-year 2% Coupon, where current closed loans are being packaged. The right side of the chart shows the daily “candles” just below the red horizontal line, which represents the best pricing ever. Follow the vaccine progress and stimulus negotiations, and let us see how prices react beneath this ceiling. A move above this level would usher in the best mortgage rates ever. A decline in prices from here would cause an uptick in mortgage rates.

Economic Calendar