Mortgage News Weekly 8/2/21

In this Issue…

A Look Into the Markets

Mortgage Market Guide Candlestick Chart

Economic Calendar for the Week of August 2 – August 6

A Look Into the Markets

“Pump it up, until you can feel it, Pump it up, when you don’t really need it” Pump It Up … Elvis Costello

This past week long-term interest rates still continue to hover at multi-month lows after the Federal Reserve maintained their position with interest rates and their bond-buying program. Let’s break down what the Fed said and what to look for in the weeks ahead.

“Until substantial further progress has been made”

This may be the most important line of the Fed Monetary Policy Statement.

The Federal Reserve has a dual mandate to maintain price stability and promote maximum employment. Here the Fed is clearly saying they need to see “substantial” progress towards this dual mandate before they can signal tapering bond purchases and ultimately hiking rates. With over a record 9 million jobs available in the U.S., it is going to take some time before the Fed will consider changing its current position.

Stocks, bonds and rates liked the idea that the Fed will continue to buy bonds and “pump up” the markets, despite many economists saying “we don’t really need it”.

“Inflation has risen, largely reflecting transitory factors”

Inflation is the arch-enemy of interest rates, so it is this portion of the Fed mandate Mr. Powell had to defend in his press conference. He was very clear that his definition of high inflation is something that remains “persistently high” for a “persistent” amount of time. So, we will not know if higher inflation is transitory for several months. In the meantime, bonds don’t appear to be worried about inflation as the 10-year Note yield hovers beneath 1.30%.

There is a famous market saying: “Don’t Fight the Fed.” If the Fed says they need to see “substantial” further progress towards their dual mandate and 9 million jobs remain available…we should expect the Fed to maintain its current position and make no changes on its monetary policy.

Providing further cover for the Fed to hold its position is the renewed COVID fears related to the Delta variant, along with some more restrictions. Think lower for longer as it relates to interest rates.

Bottom line: Interest rates are at the best levels seen since mid-February, making it a great opportunity to secure a home loan. For anyone considering a mortgage, now is the time. Be sure to look at the chart below as it shows the current limitations to better rates.

Looking Ahead

Next week we focus on the Fed’s employment portion of their dual mandate as both ADP and the Jobs Report are released. If these numbers come in strong, taper talk will quickly reemerge. However, if the reports miss expectations, the Fed will not have to defend its current position.

Mortgage Market Guide Candlestick Chart

Mortgage-backed securities (MBS) prices are what determine home loan rates. The chart below is the Fannie Mae 30-year 2% coupon, where current closed loans are being packaged. As prices go higher, rates move lower and vice versa.

MBS hit right at their 200-day Moving Average (purple line), which stopped prices from moving higher still. If prices remain beneath this purple line, home loan rates will remain at or lower than current levels. Should prices be able to break above the purple line, rates could move another leg lower from here.

Chart: Fannie Mae 30-Year 2% Coupon (Friday, July 30, 2021)

Economic Calendar for the Week of August 2 – 6

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services, and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors. As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you. Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Market Guide, LLC does not grant to you a license to any content, features, or materials in this email. You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.