Direction of Mortgage Rates

Hello Everyone,

Here's the current commentary from our rate lock department:

The market after a brief rally in the morning sold off as profit takers came in and sold the market off. This caused most investors who priced early to post a revised rate sheet.

Most of the weeks economic numbers have been neutral to slightly bullish overall, the pinnacle of course was the Fed's statement holding things steady and not changing their inflation expectation. This has a calming effect on the market which I believe will work into the market in the form of a short term rally.

Even though January nonfarm payrolls were considerably weaker than anticipated (111k vs. 206k in December), there were +99k in revisions to the last four months. This means the three-month moving average on nonfarm payroll gains basically held steady at +171k. The private service sector produced 90k jobs in January after averaging +194k in the prior three months. The manufacturing sector continued to lose jobs (-16k vs.-18k previously)-the seventh consecutive decline.

The rest of the employment report was softer. Manufacturing aggregate hours were down 0.8% in the month, pointing to soft production and a declining capacity utilization rate. Overall hours were down 0.1% and set the quarter up for a weak start in terms of GDP, which we have pegged at just under 2%. Average hourly earnings are now more consistent with the employment cost index, up just 0.2% in January after a 0.1% downward revision to +0.4% in December. Over the last year, earnings are up a reasonable 4%. We think the Fed is likely to be happy with this situation.

Translation: We're thinking rates will be steady to slightly down in the short term.

John Shea
Vice President
Summit Mortgage
781-224-2809 (office)