10/13/2023
Happy Friday, October 13?? We’re well into the spooky season and for some, Friday, October 13th, may be an especially frightening day. Hopefully, financial markets today do not have friggatriskaidekaphobia: the fear of Friday the 13th. The word comes from Fr**ga – the Norse goddess that Friday is named after – combined with triskaidekaphobia – the fear of the number 13. Yesterday we saw new data on CPI, which gave the fixed-income markets a small spook as inflation remains at a pace above the Fed’s target. We also saw new data from Freddie Mac that indicated mortgage rates have continued to move in a spooky high direction. Given recent volatility in the market and the general trend of rates that creeping gradually higher, I’m hoping for some good news on a traditionally unlucky day.
CPI increased slightly above expectations
Consumer Price Index (CPI) data was released yesterday and prices in September rose 3.7% year-over-year, just a little bit higher than the consensus 3.6%. Looking at individual components of the economy, we see that shelter and energy were the main drivers of the increase in CPI. Rent of primary residence increased 0.5% ,and owner’s equivalent rent of residences – or hypothetically how much a homeowner would have paid if they had rented instead of bought their home – increased 0.6% month-over-month, while fuel oil is up 8.5% and gasoline is up 2.1% month-over-month. Remember, these components are not equally weighted, i.e.: as a country, we spend more of our money on shelter than on motor vehicle insurance.
Yesterday we experienced the mortgage bond market react to inflation, pushing rate sheet pricing worse by approximately 3/8 of a point in the afternoon re-price. Unfortunately, higher for longer inflation may result in higher for longer mortgage rates.
Turning some bad inflation news around into some potentially good news for retirees: Social Security Administration announced yesterday that most beneficiaries will see their checks rise by 3.2 percent next year to help keep up with rising prices, which will amount to average additional benefit of $50/month.
Average 30-year fixed mortgage rates continued to climb
Yesterday, Freddie Mac updated the Primary Mortgage Market Survey (PMMS), an indicator of average interest rates on Freddie Mac loan applications. The last week was the fifth week in a row the average 30-year fixed interest rate has risen, up 8 bps week-over-week to 7.57%. It’s important to remember that Freddie PMMS rates are based on applications with the “most popular borrower profile” – good or better credit, 20% downpayment (80 LTV) home purchase on a 1-unit ssingle-familyresidence. Many of our clients are not in this “most popular” scenario and may be looking at even higher interest rates in some situations! Thankfully, we offer programs like the ONE+ which help lower-income homebuyers afford their home in this market.
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