Orion’s brokers have seen mortgage rates move higher in recent weeks, mostly because of the economy in the United States gathering some steam, tourism increasing, and inflation picking up over the Fed’s target. These and other factors have causedthe Federal Reserve to announce that it is scaling back on its near-daily purchases of U.S. Treasury securities and securities backed by Agency mortgages (Freddie Mac, Fannie Mae, and FHA & VA; not jumbo or non-QM or other “private label” securities).

The mood changed at the end of the week when mortgage rates plummeted. Brokers should remember that yes, the financial markets were “thinly traded” and illiquid, but the pandemic news dominated headlines. Austria and Belgium implemented lockdown measures in recent days and the press is focused on a new variant in South Africa (where only 35 percent of the population is vaccinated). If this new variant forces the United States back into lockdown mode ahead of the holidays, that is a problem. Orion’s brokers bad news for the economy is good news forrates, but still, I think we’d all like to put this pandemic behind us.

Orion’s management sees that the Fed is in a tight spot, one the one hand being pushedby inflation news, but subject to the same headline risk that we all are. In a kneejerk reaction, the headline pandemic news is already pushing back expectations of tapering and of rate hikes despite fundamental economic news.

Taking aglance at last week’s news, the biggest surprise was the initial jobless claim sprint of 199,000, the lowest since 1969. While one week certainly does not make a trend, the decline in new claims is consistent with an environment where employers may be reluctant to let people go in the face of a lack of available workers. Consumer spending remains robust despite inflation that reached its highest year-over-year growth rate since 1990. Since the beginning of the year, wages and salaries have increased 7.6 percent, the fastest rate in the last 42 years.

Turning to housing, which is of particular interest to Orion’s brokers and your clients, existing home sales increased 0.8 percent to a 6.34-million-unit annual pace in October and new home sales rose to a 745,000-unit pace. Builders are still facing backlogs due to materials and labor shortages which have been pushing out completion timelines. We think it is possible that, based on current demand, it could take a couple years for builders to complete their current pipelines.

No one has a crystal ball or answers on this latest variant, and you shouldn’t pay for rate forecasts. This once again proves that when markets are driven by headlines rather than fundamental news it is impossible to predict rates. It is best to rely on moving ahead with your plans and working with an Orion AE in these volatile times to make sure your client is taken care of.

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