As we move into last month of 2019 mortgage rates remain low and processing times remain fast. Conventional, FHA and Jumbo mortgage rates for both purchase and refinance transactions remain the most attractive loan programs.
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Opportunities and Risks in December:
As mentioned; mortgage rates are low right now and the big question for December is:
- Will mortgage rates remain stable, move lower or mover higher?
Answering that question is difficult at best. The biggest opportunity for mortgage rates to move lower might be the first week or two in December. The first two weeks of December will be important for mortgage rates in that we have many important economic reports being issued and there is a Fed meeting (second week). ISM, Employment, CPI and Retail Sales are some of the most important reports being issued during the first two weeks of December.
How could this benefit mortgage rates?
Simply put; weaker reports could lead to lower mortgage rates. When economic reports come in below expectations investors in bonds (specifically Mortgage Backed Securities) become more concerned about the economy and that leads to more bond purchases. And when bonds rally mortgage rates improve.
Risks for mortgage rates in December:
Three big ones stand out as significant risks to mortgage rates:
- Better than expected economic data
The big two are a China trade deal and economic data that comes in better. These two can have the biggest impact on bond markets and mortgage rates. For nearly two months we’ve been hearing a trade deal with China is about to be completed (phase one) and so far nothing. Brexit news could heat up again as the UK votes later this month. As for economic data; better than expected economic data might push mortgage rates higher in December.
Economic Calendar For December:
Here we cover the daily economic events that might impact mortgage rates. After the report comes out we’ll update the post with that information and comment on if there is a potential impact on on the Mortgage Backed Securities market and consumer mortgage rates.
Monday – December 30th:
- Chicago PMI: Expectations are for a reading of 48.0 after last months reading of 46.3. The report came in at 48.9 showing the area still in contraction mode.
Monday – December 23rd:
- Durable Goods – November: The market was expecting a 1.5% increase in Durable Goods after last months 0.5% increase however the report came in significantly below expectations. The report showed a decline of -2.0% and post report the bond market rallied with the 10y yield dipping below 1.90% (it opened the day at nearly 1.92%.
Friday – December 20th:
- Final GDP Q3: The final reading for Q3 GDP came in at 2.15% (no surprise).
- Consumer Sentiment: Expectations were for a reading of 99.2 and the reading came in at 99.3.
- Consumer Spending: For November the expectations for Consumer Spending are for an increase of 0.4% (after the October report showed a 0.3% increase). The report ended up matching expectations.
- Personal Income: According to the report for October there was no growth in Personal Income. Expectations for the November report are for an increase of 0.3% however the report came in higher than expected (0.5%).
- Core PCE: Analyst are predicting at 1.6% (y/y) increase and a 0.1% (m/m) increase. The report came in line with expectations.
Thursday – December 19th:
- Philly Fed Business Index: In November the reading came in at 10.4 and expectations for this month were 8.0 however the reading came in at a dismal 0.3.
- Jobless Claims: Weekly claims dropped compared to last week; 234,000 vs 252,000. However continued claims jumped from 1.681 million to 1.722 million.
- Existing Home Sales: Expectations are for a decline of 1.7%.
Wednesday – December 18th:
- Mortgage Market Index: Last week’s Mortgage Market Index reading came in at 532.1 and this weeks reading came in at 505.3. The Purchase component came in at 261.6 (a drop from last week) and the Refinance component came in at 1958.7 (also a drop from last week).
Monday – December 16th:
- NY Fed Manufacturing: Back in November the report came in at a 2.90% increase and the expectations for the December report at 4.00%. However the actual reading came in lower; 3.50%.
- PMI Composite (Service and Manufacturing: Last month composite reading came in at 52.0, the Service component came in at 51.6 and the Manufacturing component came in at 52.6. The composite reading came in at 52.2, the Service component came in at 52.2 and the Manufacturing component came in at 52.5.
- NAHB Housing Market: Expectations are for a reading of 70 (which is the same as last months reading).
Friday – December 13th:
- Retail Sales: Last month the report showed a 0.3% gain and the market was expecting a 0.5% gain for the most recent report. However the report came up short and only showed a 0.2% increase in retail sales.
- Import and Export Prices: Import Prices came in at 0.2% (as expected) and Export Prices came in at 0.2% (just above expectations).
Thursday – December 12th:
- Core Producer Prices: The market was expecting a 1.6% increase (y/y) and a 0.2% increase (m/m). The numbers came in below that; the year over year reading came in at 1.3% and the month over month reading came in at -0.2%
- Jobless Claims: There was a significant increase in the number of claims compared to last week. The report showed 252,000 claims were filled compared to last weeks reading of 213,000.
Despite the weaker than expected reports; the bond market sold off today and mortgage rates moved higher on China trade deal news. According to a tweet from the President; “we are VERY close” to a deal.
Wednesday – December 11th:
- Mortgage Market Index: The weekly index showed an increase in applications with the main index increasing from 512.4 last week to 532.1 this week. The Purchase component came in at 268.3 (last week it was 269.4) and the Refinance component came in at 2094.1 (last week it was 1925.7).
- Core Consumer Price Index (CPI): The previous report (November, 2019) came in at 2.3% and the December report came in at 2.3%. The Core CPI report used to be a big market mover but that has changed in recent months. Lately it’s had little to no impact on bond markets and mortgage rates since the reading has been fairly stable for most of 2019.
- Fed Decision: At 2:00pm (EST) the Fed will announce their rate decision at the last meeting of 2019. No one is predicting the Fed to take any action as the expectation is the Fed is in “wait and see” mode for the foreseeable future.
Tuesday – December 10th:
- Productivity Q3: The market was expecting a decline of -0.1% however the report showed a -0.2% decline.
- Labor Costs Q3: The market was expecting the reading to come in at 3.3% however it came in lower (2.5%).
Friday – December 6th:
- Employment Report: The market was expecting 180,000 jobs, a wage increase of 0.3% and an unemployment rate of 3.6%. The report was significantly better than that as far as number of jobs created: 266,000 jobs. Unemployment rate also came in better than expected; 3.50% and wages came in below expectations at 0.2%.
- 5y and 1y Inflation Outlook: The report showed 5y Inflation Outlook at 2.5% and the 1y Inflation Outlook at 2.5%.
- Consumer Sentiment: Last months reading came in at 97.0.
Thursday – December 5th:
- Weekly Jobless Claims: This weeks report came in at 203,000 claims after last weeks report of 215,000 claims.
- Factory Orders – October: Market expectations are for a o.3% increase after last months -0.6% decline and that’s exactly what the report showed.
Wednesday – December 4th:
- Mortgage Market Index: The overall Mortgage Market Index came in at 512.4 after last months reading of 564.1. The biggest reason was that refinance applications tanked; 22282.2 last week vs 1925.7 this week.
- ADP National Employment: The market was expecting a reading of 140,000 non-government jobs created after last months reading of 125,000. However the reading came in way below expectations at only 67,000 jobs created.
- ISM Non-Manufacturing PMI-November: Another important report disappoints. The market was expecting a reading of 54.5 however the reading came in at 53.9.
With two misses the market still sold off (normally it would rally) which shows how important the trade negotiations are to the market. It’s important to keep this in mind when making mortgage rate lock decisions.
Tuesday – December 3rd:
- ISM-New York Index for November: Expectations are for a reading of 874.3 and that is what was reported.
Monday – December 2nd:
- ISM Manufacturing PMI-November: The reading came in lower than expected (48.1 vs 49.2). Last months reading came in at 48.3. Overall this is another weak report and the ISM report is an important one to keep an eye. Post report Treasuries and Mortgage Backed Securities both rallied on the weaker than expected data.
- Construction Spending: The reading came in weaker than expected; -0.8% vs 0.4%. Last months reading was revised lower to -0.3%.
JB Mortgage Capital, Inc.:
We offer industry low mortgage rates for both refinance and purchase transactions, personal one-on-one service and we have an A+ rating with the Better Business Bureau (BBB), a five star rating on Zillow and a five star rating on Yelp. We also have a top rating with the Business Consumers Alliance (AAA).
We utilize the latest technology to ensure a fast closing and Loan Officer Kevin O’Connor has over 14 years of experience as a mortgage professional. When it comes to mortgage rates please keep in mind that mortgage rates adjust daily; sometimes they adjust multiple times in a day when the bond market is volatile.
Also things like obtaining cash out, lower credit scores, higher Loan-To-Value ratios, rental properties and the subordination of a second mortgage will cause in an increase in your mortgage rate.
To obtain the most up-to-date quote, specific to your loan scenario be sure to contact Loan Officer Kevin O’Connor at 1-800-550-5538 or you can submit a “Contact Us” request on the our website.
Mortgage Backed Securities & Treasury Snapshot:
December 30th – 31st:
Mortgage Backed Security FNMA 3.0 started the week at 101.33 and the FNMA 3.5 coupon started the week at 102.78. At the open the 10y Treasury yield was just above 1.91%.
Week of December 16th – December 20th:
Mortgage Backed Security FNMA 3.0 started the week at 101.30 and finished the week around 101.05. The FNMA 3.5 coupon started the week at 102.75 and finished around the 102.60 level. The 10y Treasury yield started the week at the 1.84% level and headed into the weekend around the 1.90% level.
The good news for mortgage rates this week is that after the the Philly Fed report bonds rallied; the 10y yield moved below 1.93% and Mortgage Backed Securities were nearly positive post release.
Week of December 9th – December 13th:
Mortgage Backed Security FNMA 3.0 started the week at 101.39 and finished around 101.09. The FNMA 3.5 coupon started the week at 102.73 and finished below 102.60. The 10y Treasury yield started the 1.82% level and moved higher by the end of the week (1.87%).
Important event: The President tweeted that a deal with China was “VERY close” and various news outlets claimed the US was not going to implement the December 15th tariffs.
Week of December 2nd – December 6th:
Mortgage Backed Security FNMA 3.0 started the week at 101.31 and the FNMA 3.5 coupon started the week at 102.61. The 10y Treasury yield started the week at the 1.77% level. Mortgage Backed Security FNMA 3.0 ended the week lower and the FNMA 3.5 coupon also finished the week lower. The 10y Treasury yield was around the 1.86% level heading into the weekend.
On Monday – after the open bonds rallied on comments made by President Trump. He said he might wait until after the November 2020 election to agree on a trade deal and also some news organizations were reporting that the December 15th tariffs will happen (according to the White House). By 10:45 (EST) the 10y yield moved below 1.72% and the FNMA 3.0 was at 101.67 and the FNMA 3.5 was at 102.80.