What’s Ahead For Mortgage Rates This Week – October 16, 2023

Last week’s economic report schedule included notable reports with the CPI & Core CPI in addition to PPI and Core PPI. Many markets are keeping a close eye on the inflation numbers for the U.S. as well as many other parts of the world to help guide their policies.

Other notable reports were MBA Mortgage Applications Index and the University of Michigan Consumer Sentiment Report (Prelim.)

Consumer Price Index
With current inflation data, the Federal Reserve has hinted that they are close to ending their rate-hiking cycle for the future. This reflects a greater optimism for a soft landing in many markets.

  • Cost of goods rose 0.9% in September after a 2% gain in the prior month.
  • The cost of services rose 0.3% last month, up slightly from 0.2% in August.
  • Energy prices rose 3.3% in September, down from a 10.3% gain in the previous month.
  • Wholesale food prices have moved up 0.9% after a 0.5% fall in the previous month

Product Price Index
Over the last year, the mainline PPI is up 2.2% in September, up from 2% in the prior month. This is the highest rate since April.

  • Core PPI has had an increase of 0.3% over the previous month.
  • PPI has had an increase of 0.5% over the previous month.

Key point: This is the second month in a row that goods prices have outpaced service costs.

Mortgage Applications Increased for the Month of October
MBA Mortgage Applications Increase, a measure of mortgage loan application volume, increased 0.6% percent compared to the previous month which had seen a -6.0% reduction.

University of Michigan Consumer Sentiment Report
The University of Michigan reported that the preliminary index for Consumer Sentiment in October came in at 63, missing the consensus estimate of 67.4. The final reading of the index for September was 68.1. Expectations for the one-year inflation rate rose to 3.8% in October from 3.2% in September, marking its highest reading since May.

What’s Ahead
This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.

What’s Ahead For Mortgage Rates This Week – October 9, 2023

The previous week offered a blend of economic updates, covering a report on the jobs market and weekly changes in mortgage rates.

The Jobs Report Was Released
This week, the monthly jobs report was released by the United States Bureau of Labor and Statistics. It showed that the job market completely exceeded all expectations, adding 336,000 jobs during the month of September. That was far higher than the expected number of 170,000. It also represents a significant increase when compared to August, where the economy added a revised total of 227,000 jobs.

The unemployment rate remained relatively steady, coming in at 3.8 percent, which is the same as August. This jobs report is important because it could play a role in whether the Fed decides to raise interest rates in November or keep them the same. With the jobs growth exceeding all expectations, it could give the Fed reason to raise interest rates, as the Fed might believe the economy is still red hot and can tolerate higher interest rates.

A Shift in Mortgage Rates and Employment Dynamics
The 30-year fixed mortgage, the most popular in the United States, continues to trend upward. This week, the average 30-year fixed climbed to 7.8 percent, up significantly from 7.55 percent last week. This is also significantly higher than the rates were in August, which averaged around 7.15 percent. Some experts are stating that a potential rate of 8 percent is not out of the question.

The 15-year fixed mortgage rate has also continued to trend upward, albeit not as much. This week, the average rate for a 15-year fixed mortgage was 7.12 percent, up from 7.05 percent last week. This is still significantly higher than the 6.5 percent average that we saw in August.

It is clear that these rising mortgage rates are putting a damper on those looking to buy a home; however, it does not appear to have caused a major drop in housing prices, although its impacts could still be yet to come.

Consumer Sentiment: A Mild Dip
Consumer sentiment appears to be holding steady, with the current numbers coming in around 68.1. This is still a bit lower than the numbers were in August when they came in at around 69.5. At the same time, the overall sentiment of the current economic conditions continues to trend downward, coming in around 71.4, compared to 75.5 in August.

Consumers are still concerned about inflation and rising interest rates, which make it harder to make ends meet. It will be interesting to see how the jobs report impacts consumer sentiment moving forward.

Looking Forward
The Producer Price Index is due to be released next week, which is another key component of inflationary data. For now, all eyes will be on the Fed’s next meeting, which takes place in early November. The Fed will decide whether to raise rates or hold them steady for another cycle.

What’s Ahead For Mortgage Rates This Week – October 2, 2023

Last week, consumers were treated to several indicators on inflation that not only paint a picture of the economy’s health but also give the Fed more information to work with as it continues to aim for a soft landing.

August Sees a Slight Upward Trend in Inflation

This week, the personal consumption expenditures price index, which excludes more volatile commodities like food and energy, increased 0.1 percent for the month. This is lower than the expected value of 0.2 percent, which indicates that the rising interest rates are starting to have an impact on the economy as the Fed continues to work to bring down inflation.

When compared to the previous 12 months, the price index was up 3.9 percent. This matched expectations and shows that inflation could finally be turning a corner. In addition, consumer spending rose 0.4 percent in August, which is down sharply from 0.9 percent in July. This is another indicator that higher interest rates are having an impact on consumers, who are finally pulling back on their spending.

As the month continues to progress, a lot of people will wait and see how the Fed’s decision to hold interest rates steady will impact the economy. Those looking for houses will probably be excited that interest rates were held steady, but it will be interesting to see how this decision impacts the fight against inflation.

Mortgage Rates Continue To Rise

This week, the 30-year fixed mortgage rate sits at around 7.59 percent on average, which remains one of the highest rates in decades. In August, the average rate was 7.18 percent, indicating that rates have gone up sharply. This is also up slightly from the previous week, where the average 30-year fixed rate was 7.51 percent.

What's Ahead For Mortgage Rates This Week - October 2, 2023In addition, 15-year fixed mortgage rates have gone up as well, with the national average sitting at around 6.82 percent. This is up from last week, when the average 15-year fixed was 6.51 percent. This is also up slightly from August, where the rates hovered around 5.84 percent.

Because the Federal Reserve decided to hold interest rates study, many home buyers are hoping that mortgage rates will stabilize for a couple of months. It remains to be seen if that will happen.

Consumer Sentiment Might Be Stabilizing

The consumer sentiment report from the University of Michigan is stabilizing, with numbers for September coming in at around 68.1. While this is a slight dip from August’s average numbers, the numbers for September are starting to rise.

Consumers might be starting to relax a little bit because inflationary numbers are starting to come down. For consumer sentiment to rise further, mortgage rates might have to come down without contributing to a spike in inflation or home prices.

This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.

Looking To Next Week

Next week, the unemployment data is going to be released, as initial jobless numbers are going to come in. This is a key indicator because rising interest rates generally lead to more layoffs, which could jeopardize the Fed’s goal of a soft landing.