Mortgage rates headed slightly lower on Wednesday, as treasury bonds strengthened, following the release of the Fed Minutes. The U.S. central bank released the Minutes from its last policy-setting meeting, which revealed that most Fed officials believe that it might be appropriate to raise the federal funds rate „fairly soon”, if the labor market remains healthy and inflation data comes in line or stronger than current expectations. Economists believe, that next week’s U.S. jobs data may have a significant impact on the prospects of a rate increase in March.
As far as the Fed Minutes is concerned, many investors were hoping for some strong clues on the timing of the rate hike, but that didn’t happen. Markets reacted accordingly, as bonds improved. Also, a number of lenders improved their mortgage pricing, which is why current mortgage rates are in line with those from a day earlier.
In the secondary market, the 10-year treasury note, which is a bedrock of global finance, finished Wednesday’s trading session at a yield of 2.42%, down 1 basis point compared to data from Tuesday. Mortgage rates tend to trail behind the 10-year treasury note. As the 10-year yield headed slightly lower, you may see some minor improvements in mortgage pricing at certain lenders. The long-term, 30-year treasury yield remained unchanged at 3.04% at the end of the trading session.
This Thursday morning pricing on mortgage-backed securities (MBS) is on the rise, following the release of the latest jobless claims data (more on that later). Mortgage shoppers may see improved interests rate sheets later today, in case MBS stays in the green.
U.S. mortgage rates increased slightly this week, after moving lower the previous week, according to Virginia-based housing giant, Freddie Mac. The federal agency’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday, showed that the average interest rate on 30-year fixed mortgages ticked up 1 basis point to 4.16% in the week ended February 23. On average, lenders were offering 15-year fixed conventionals loans at a rate of 3.37% this week, up 2 basis points compared to the 3.35% in the prior week. The average rate on the flexible 5-year ARM was lower this week, as it came in at 3.16% this week versus 3.18% a week earlier, Freddie Mac reported.
Fedspeak will remain in focus today, as Dallas Fed President Robert Kaplan and Atlanta Fed chief Dennis Lockhart will speaker about monetary policy later on. Earlier this week, several regional top Fed officials made public appearances and shared their views on interest rate policy. Speaking at a conference in Singapore on Monday, Cleveland Fed President Loretta Mester said that she would be comfortable raising rates at this point, if the economy stays on course. On Tuesday, Philadelphia Fed chief Patrick Harker said, that “Given the state of the economy — more or less back to normal – I continue to see three modest rate hikes of 25 basis points each as appropriate for 2017, assuming things stay on track,”. Harker, added that the possibility of a rate hike at the upcoming Fed meeting in March shouldn’t be off the table. On the other hand, Minneapolis Fed President Neel Kashkari believes, that the labor market has „more room to run”, possibly suggesting that the U.S. central bank should hold off raising rates.
On Wednesday, an influential central banker, Fed governor Jerome Powell said, that the U.S. central bank is set to gradually raise rates, if the economy stays on track. Powell also told reporters that a monetary tightening in March is on the table. Right now, the market is pricing in a 22.1% probability of a rate hike next month, according to the CME FedWatch tool, which is used by investors and traders to predict future monetary policy. That’s up 4.5% compared to data from yesterday.
More Americans filed for unemployment benefits last week, but layoffs remained near ultralow levels, according to data from the Labor Department released Thursday. Initial jobless claims advanced by 6,000 to a seasonally adjusted 244,000 in the week ended February 18. The consensus expectation was for a reading of 240,000. First-time claims from a week earlier were revised down to 238,000 from 239,000. This marks the 103rd consecutive week that the number of applications for unemployment benefits remained below the 300,000 threshold, a number which is associated by many analysts with a healthy labor market.
Current mortgage rates are still attractive, however, the next FOMC in March might pose a danger for low mortgage rates. At this point nobody knows whether the Fed will hike rates next month or not, but if it does, mortgage rates will most likely rise. With that said, borrowers looking to get a mortgage to buy a home or refinance an existing loan and want to avoid high borrowing costs, may better act sooner rather than later.