Stock Rally Pushes Rates Up
With long-term bond yields at or near record low levels following the Brexit vote on June 23, investors decided this week that stocks had become relatively more attractive than bonds. Investors shifted assets from bonds to stocks, pushing the Dow to a record high, and mortgage-backed securities (MBS) prices lower. Since mortgage rates are set based on MBS prices, rates moved higher. Good news: Mortgage rates still remain significantly lower than they were before the Brexit vote.
Further fueling the stock market rally, retail sales posted a fourth straight month of solid gains on Friday. Retail sales excluding the volatile auto component surpassed expectations with an increase of 0.7% in June. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator.
Factors: It’s all about housing this week. The NAHB housing confidence index will come out on Monday. Housing Starts will be released on Tuesday. Existing Home Sales will come out on Thursday. In addition, there will be a European Central Bank (ECB) meeting on Thursday which could influence U.S. mortgage rates.
For specific rates, please contact a Tradition Mortgage loan officer.