Unusual News Pushes Rates Higher
Surprisingly, the biggest influences on mortgage markets last week were comments from President Trump about Greenland. Major inflation data delayed by the government shutdown matched expectations and caused little reaction. The Greenland news was mildly negative for mortgage rates, which ended last week slightly higher.
Greenland Comments Shake Bond Markets
Last Tuesday, President Trump said that the acquisition of Greenland was important for US national security and threatened to impose additional tariffs on countries preventing this from happening. Many European countries were strongly opposed, and one small investment fund in Denmark sold its holdings of US bonds in protest. Concern that this might be just the tip of the iceberg and much larger selling might take place caused US bond yields to rise, including mortgage rates. However, yields reversed and moved lower last Wednesday when President Trump ruled out the use of military force to acquire Greenland.
Core PCE Ticks Higher
Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In November, Core PCE was 2.8% higher than a year ago, up from an annual rate of increase of 2.7% in October and matching the consensus forecast. Progress toward the 2.0% target of the Fed has not been easy, and this desired level has not been achieved since February 2021. The big question remains how large an impact higher tariffs will have on future inflation levels.
Jobless Claims Hit Two-Year Low
The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading was just 200,000, below the consensus forecast. The four-week moving average, an indicator that helps smooth out volatility, was just 201,500, the lowest level in two years. Bigger picture, this was far below the inflated figures seen during the early months of the pandemic, and in line with the levels which were typical during 2019. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends. While other recent economic reports suggest that companies may be scaling back on hiring new employees, this report indicates that they remain reluctant to lay off workers.
Refinance Demand Soars Again
It was another good week last week for mortgage applications, especially for refinancing, according to the Mortgage Bankers Association. Applications to refinance surged 20% from last week and were a massive 183% higher than one year ago. Purchase applications rose 5% from the prior week and were up 18% from last year at this time.
Mortgage Rates for the week of 1-26-2025