It's a new month and a new year for mortgage rates. Last year at this time mortgage rates were significantly higher after 30 year fixed rates briefly moved above 5.00% in October. By February, 2019 mortgage rates made a dramatic improvement as 30 year fixed mortgage rates moved below 4.50%. Refinance applications and purchase applications were picking up as more people were looking to lock in a lower rate.

So what's in store for January, 2020?

Great question! Mortgage rates are stable right now thanks for a somewhat stable Mortgage Backed Securities market. 30 year fixed rates are below 3.75% and 15 year fixed rates are below 3.25% (generally speaking). If you have a low credit score or if you are obtaining cash out you might be obtaining an interest rate above these levels. Another instance in which your rate might be higher is if the transaction is for an investment property.

First Full Week of January:

As usual the time between Christmas and New Years was fairly slow however as we move into the first full week of January refinance applications and purchase applications should start to pick up. It will be an interesting week for mortgage rates as we have several very important economic reports on the calendar. On Tuesday we have the ISM Non-Manufacturing PMI, on Wednesday we have the weekly Mortgage Market Index, Consumer Credit and the ADP Employment report. On Thursday there is an important 30 year bond auction and on Friday is the BLS Employment Report. I'll highlight a few of the more important reports:

ISM Non-Manufacturing Report:

The report will be released at 8am (PST) and this report can have an impact on Mortgage Backed Securities and consumer mortgage rates. The ISM Non-Manufacturing report is a survey of more than 370 purchasing and supply executives through out the country. Expectations are for a reading of 54.5 after last months reading of 53.9. If this report comes in below expectations we might see a small improvement to mortgage rates. If the number comes in below 50, which signifies contraction, that would most likely help mortgage rates improve.

BLS Employment Report:

This is probably one of the bigger reports the industry focuses on because it gives us a good look at an important part of the economy. Most areas of the economy have weakened however employment is performed a bit better. Non-farm payroll expectations are for 160,000 jobs created after last months blockbuster report of 266,000 jobs created. The report is expected to show an unemployment rate of 3.5% and a 0.3% increase in wages. 

The wage component is very important to industry professionals because if wages are increasing too fast that might create inflation which is bad for mortgage rates.

Keep An Eye On:

By now I'm sure you've heard about the killing of an Iranian General and how tensions between Iran and the US are getting worse. Right now there has been little to no impact on mortgage rates but if war breaks out it could get interesting. The relationship between war and consumer mortgage rates is not something that's easy to understand nor is it easy to predict how mortgage rates will react to future developments. The best we can hope for is to be prepared and take advantage of opportunities as they present themselves. Usually a crisis like this is short term so mortgage companies proceed with caution because post crisis the market may change and actually move much higher (all things being equal). 

Also keep an eye on the signing of the trade deal between the United States and China. Still no formal presentation of what the two countries will be signing. It's expected the two will sign on to the Phase One deal in January but per the American side the translation is still being worked out.