Orion’s brokers know where rates are because that’s their job. Mortgage rates, however, don’t care what day, month, or year it is since the bond market doesn’t “start over” because one year ends and another begins. Brokers tell their clients that products and service is what matters because rates change every day. Orion’s reputation for being there when our brokers need us doesn’t change either based on the month or year. And regardless of the year ending, brokers are out there helping borrowers finance their dream home. We feel it is important to educate our clients about what economic conditions are, or may, move mortgage rates since you may need to explain that to your clients.
Looking ahead to 2021 (yes, we’re almost there!), economists expect official measures of inflation to increase in the second quarter as they will be compared to the historic price declines of 2020. It is expected that the Federal Open Market Committee, part of the Federal Reserve, would look past any significant spike as a one-off, and would not be a catalyst for tighter monetary policy on its own. So that, in itself, is not a sign of higher rates.
Other data indicates continued lower rates for your clients. Recent economic data continues to support a narrative of continued, but slower, expansion in the fourth quarter with potential downside risks first the first quarter of 2021. Consumer prices increased 0.2 percent in November and were up a modest 1.2 percent for the year as energy and airline prices rebounded. Producer prices increased by an even smaller 0.1 percent for the month and 0.8 percent over the previous twelve months. Inflation remains tame and below the Fed’s preferred annual pace of twelve percent and there is no worry about significant monetary tightening in the near term. No rate pressure there.
Also keeping rates low is the employment picture. Initial jobless claims showed an unexpected increase last week. While it is too soon to assume an upward trend, it does point to the ongoing weakness in parts of the labor market and there were still 19 million people collecting some form of assistance.
There is good news on the vaccine front, however, as we’ve seen in the headlines. But the days of vaccination leading to a stronger economy are way in the future. Until then, the U.S. economy is expected to bump along, and mortgage rates are expected to stay low for Orion’s brokers and your clients.