Jerome
Powell,
the
chair
of
the


Federal
Reserve,
said
on
Thursday
that
the
U.S.
economy
is
“not
sending
any
signals
that
we
need
to
be
in
a
hurry
to
lower
rates.”
The
statement
was
enough
to
raise
mortgage
rates
to
an
even
higher
level,
a
sharp
departure
from
the
optimism
lenders
experienced
during
the
September
rally,
which
now
seems
like
a
distant
memory.

“We
are
moving
policy
over
time
to
a
more
neutral
setting.
But
the
path
for
getting
there
is
not
preset,”
Powell
said
in
an
economic
outlook
speech
in
Dallas.
“The
strength
we
are
currently
seeing
in
the
economy
gives
us
the
ability
to
approach
our
decisions
carefully.
Ultimately,
the
path
of
the
policy
rate
will
depend
on
how
the
incoming
data
and
the
economic
outlook
evolve.” 

When
considering
the
Fed’s
dual
mandate,

inflation
is
getting
closer
to
the
2%
goal,
but
“it
is
not
there
yet,”
Powell
said.
Data
released
this
week
indicates
that
personal
consumption
expenditure
rose
2.3%
over
the
12
months
ending
in
October
and
2.8%
if
excluding
volatile
food
and
energy
categories.

Meanwhile,
the
labor
market
“is
now
by
many
metrics
back
to
more
normal
levels
that
are
consistent
with
our
employment
mandate,”
Powell
said.
He
added
that
the
unemployment
rate
at
4.1%
is
“notably
higher
than
a
year
ago
but
has
flattened
out
in
recent
months
and
remains
historically
low.” 

Traders
dialed
back
bets
on
a
December
rate
reduction.
Prior
to
Powell’s
comments,
the

CME
Group‘s
FedWatch
tool
showed
that
72%
of
interest
rate
traders
expected
officials
to
lower
rates
by
25
basis
points,
which
was
reduced
to
58.7%.
Those
who
expect
rates
to
remain
at
the
current
target
range
of
4.5%
to
4.75%
went
from
27.8%
to
41.2%. 

Financial
markets
quickly
responded
to
Powell’s
comments,
with
stocks
getting
hit
and
Treasury
yields
spiking.
The
U.S.
10-year
yield
jumped
to
4.450%
on
Thursday.

The
30-year
fixed
mortgage
rate,
which
correlates
with
long-term
government
bonds,
increased
to
6.97%
at

HousingWire’s

Mortgage
Rates
Center,
compared
to
6.94%
on
Monday.
At


Mortgage
News
Daily,
rates
were
at
7.02%
on
Thursday
afternoon.

For
mortgage
lenders,
“the
upward
move
in
mortgage
rates
puts
the
mini-refi
rally
we
experienced
in
September
on
ice
for
the
time
being,”
Derek
Sommers
and
John
Hetch,
equity
analysts
at

Jefferies,
said
in
a
report
on
Friday. 

During
the
third
quarter,
when
mortgage
rates
moved
towards
6%,
origination
volumes
increased
17%
quarter
over
quarter
for
seven
companies
covered
by
the
analysts
–


Guild
Mortgage,


Rocket
Mortgage,


United
Wholesale
Mortgage,


loanDepot,


Mr.
Cooper,


Onity
Group
and


Pennymac
Financial
Services.
Origination
segment
earnings
increased
126%
quarter
of
quarter
“with
any
meaningful
gain-on-sale
margin
expansion.” 

“Unfortunately,
following
the
end
of
Q3,
mortgage
rates
increased
to
about
7%,
which
has
muted
the
recovery
in
origination
volumes,”
the
Jefferies
analysts
said.
“Mortgage
rates
in
the
range
of
6.00%-6.25%
is
what
it
takes
to
stimulate
refinance
activity
in
the
current
environment.”

Related