Mortgage rates headed lower on Tuesday, which marks the second straight day that rates are on a downward trajectory. Current mortgage rates are the lowest we have seen in the last few weeks. Pricing on U.S. government bonds improved on Tuesday, following a drop in crude oil prices and a strong 3-year treasury note auction. As a consequence, several lenders released rate sheets with improved mortgage pricing. The most prevalently quoted rate on the standard 30-year fixed mortgage is now down to 4.125% in the best scenarios, however it’s not uncommon that some lenders are offering this type of loan at a rate of 4.250%.
In the secondary market, the 10-year treasury yield dropped to 2.40% on Tuesday, which marks a 2 basis points decline compared to the yield a day earlier. Mortgage lenders are keeping tabs on several indicators, when it comes to determine mortgage loan pricing. One indicator stands out from all the rest, which is the yield on the 10-year treasury note. As the yield on the 10-year note have been falling lately, you may see lower mortgage rates at your lender, compared to rates from last week. On the other hand, the yield on the long-term 30-year treasury note closed Tuesday’s trading session at 3.02%, a downtick of 3 basis points since Monday.
Now, looking at bond pricing this Wednesday morning, mortgage-backed securities (MBS), which most directly influence mortgage rate movement, are in the green. A 10-year treasury note auction will take place later today, which can influence markets. Assuming that MBS pricing stays in the positive territory, mortgage rates could fall.
Looking at the latest domestic economic data, the Labor Department released the Job Openings and Labor Turnover Survey (JOLTS) for December. The latest JOLTS reported showed, that employers posted a total of 5.501 million jobs in December, slightly down from the previous tally of 5.505 million jobs a month earlier. The consensus expectation was for a reading of 5.580 million jobs.
This week lacks in big-ticket economic data, that could potentially move markets and eventually mortgage rates. However, some Fedspeak is lined up for this week, which usually has the potential to impact markets.
Earlier this week, Philadelphia Fed President Patrick Harker said at a conference in San Diego, that he is still supportive of the idea of three rate increases in 2017, depending on how the economy and fiscal policy evolves. Harker, who is a voting member of the U.S. central bank’s policy-setting committee this year, added, that a 25 basis point interest rate increase is a live option at the next Fed meeting in March.
Last week two other top Fed officials said, that they are expecting three rate hikes to take place this year. Speaking at the Prairie State College Economic Breakfast last Friday, Charles Evans reiterated his support for a gradual rate increase. Evans, who is viewed as one of the more dovish members of the U.S. central bank, said that he would be comfortable with three rate liftoffs.
San Francisco Fed President John Williams had an interview with Bloomberg TV on Friday, where he said that three rates hikes in 2017 is a reasonable guess. Williams isn’t a voting member of the Fed’s policy-setting committee this year.
Currently, the market is pricing in a 4.4% chance of a rate hike at the upcoming Fed meeting in March, according to the CME FedWatch tool. A day earlier, the Fed Fund futures were showing a 8.9% probability of a rate increase in March.
In other mortgage-related news, the Mortgage Bankers Association (MBA) reported earlier this Wednesday, that total mortgage applications volume ticked up 2.3% with seasonal adjustments taken into account in the week ended February 3. The Washington-based group’s survey showed, that the slight uptick in loan applications volume was driven by both home purchase and refinancing. The MBA’s Refinance Index rose 2% from a week earlier. However, the refinance share of total mortgage activity hit a record-low of 47.9% last week, which marks the lowest level since June 2009. As far as home loan applications are concerned, the seasonally adjusted Purchase Index climbed 2% week-over-week.
As treasury yields fell in the first half of the week, mortgage rates improved. The bottom line is that current mortgage rates are looking more attractive compared to those in the beginning of the week. As it’s difficult to call the latest movements toward lower rates a long-term trend, it’s certainly makes sense to take advantage of the current gains for those who are hunting for a house, or looking to refinance an existing mortgage.