Rates continue to fall, near 3 year lows!

Happy Friday from Local Mortgage!

With the lack of economic data due to the government shutdown, investors were focused on trade tensions with China and favorable commentary from the FED. We will end the week at 5.875% with .25% lender credit towards closing costs for our best 30-year fixed conventional scenario.

With a meeting scheduled for the end of the month between the US and China, government officials have begun to discuss trade policy publicly in an attempt to gain leverage in the negotiations. Notably, China expanded restrictions on the export of rare earth minerals. President Trump responded by threatening to raise tariffs on Chinese imports by an additional 100%. In general, the primary impact of trade wars is a reduction in global economic growth which reduces inflationary pressures, so continued trade tensions could be favorable for mortgage rates.

In a speech on Tuesday, Chairman Powell indicated that the FED may be near an appropriate level of bond holdings, another positive indicator for mortgage rates. The FED held around $4 trillion in Treasuries and Mortgage-Backed Securities prior to the pandemic, which was pushed up to a peak of around $9 trillion in 2022 and has since been gradually letting maturing bonds roll off its balance sheet. If the FED feels that he current level of around $6 trillion is appropriate, it will have to become a buyer again in order to replace bonds that are rolling off. Adding demand to the treasury and MBS market would certainly be good for mortgage rates.

Next week will be more of the same due to the government shutdown with one exception. It was announced last week that the Department of Labor will bring back staff to publish the September Consumer Price Index, which will be out next Friday.

Hope everyone has a great weekend. Thank you for reading.