US mortgage rates are forecast to rise in 2018, and the first banking day of the New Year saw mortgage rates increase. The bond markets experienced weakness quickly on Tuesday, and this raised fears that the forecasted mortgage rate increase in 2018 might materialize sooner rather than later.
Most underlying economic indicators pointed to mortgage rates increasing in the short term. Major stock markets increased slightly, the price of gold continued to rise, the price of oil remained unchanged, and the yield on 10-year Treasury notes increased.
In addition, CNNMoney’s Fear & Greed Index increased from 52 to 60, which is getting close to the index’s "greed" level. That is not a good sign for mortgage rates, as “greedy” investors tend to move into the stock market, which is associated with rising rates.
Several key economic reports will be released this week, and these might shed some light on whether a trend toward increasing mortgage rates has begun. The ADP Employment report will be released today, and the Institute for Supply Management will also release its ISM Manufacturing Index for December. The weekly Unemployment Claims report will come out on Thursday, and December’s Employment Situation report will be released on Friday.
It is still too early to reach conclusions about how mortgage rates might move during the New Year, but many lenders took Tuesday’s bond market activity as a warning that this could be the year that forecasts of mortgage rate increases prove to be accurate. After the weakness in the bond markets seen on Tuesday morning, some lenders increased their quoted mortgage rates, and lenders who did not do so might be inclined to raise their quoted rates today.
US mortgage expert Ted Rood commented on Tuesday’s financial markets: “Bonds markets retreated today [Tuesday], as stocks continued their seemingly ceaseless ascent. Treasury yields are nearing levels last seen in spring 2017. I'm staying defensive, definitely locking borrowers within 30 days of closing, and considering 45 day locks when germane to the loan.”
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