Mortgage rates remained flat at the beginning of the week, amid growing expectations that the U.S. central bank will lift rates at the upcoming FOMC meeting this month. Mortgage bonds were little changed on Monday, thus the movements in current mortgage rates are negligible at the majority of lenders. The most prevalently quoted 30-year fixed mortgage rate is still in the range of 4.000% – 4.125%.
According to the CME FedWatch tool, which is used by investors and traders to predict future monetary policy, the market is pricing in a 79% probability of a rate hike in December. This week several events will shape investors’ expectations on central bank policy, including the all-important November jobs report, which is scheduled for release on Friday. If the jobs report comes with some strong figures, it could give more confidence to the Fed to raise rates before the end of the year. On the other hand, if those jobs numbers fail to live up to expectations, it may cast doubt on the Fed’s intentions to lift rates this year.
In the secondary market, the yield on the benchmark 10-year treasury note finished Monday’s trading day at 2.21%, a 1 basis point slide compared to data from Friday. Looking at the longer-term 30-year treasury note, the yield on this type of bond dipped below 3% on Monday, and it’s currently hovering at 2.98%.
This morning MBS pricing is in the green, as a result of some weaker domestic economic data.that came out today. In case the gains won’t evaporate until the end of the day, then there’s a chance that mortgage rates will head lower.
A good amount of economic data got released this Tuesday morning, but the results are mixed. The Institute of Supply Management’s Purchasing Managers Index for November came in at 48.6 versus the expectation of 50.4, which signals contraction in the manufacturing sector. Back in October, the index was in expansion territory at 50.1. Manufacturing activity in the U.S. contracted for the first time in three years in November, due to a number of factors including a drop in energy prices, a stronger dollar and slowdown in global growth. The current reading on manufacturing activity is the lowest since June 2009.
A separate manufacturing report from Markit Economics released today showed that November’s PMI dropped to 52.8 from October’s print of 54.1.
The housing market remains one of the bright spots of the economy, the latest construction spending report suggests. Construction spending increased 1% to a seasonally adjusted annual rate of $1.11 trillion in October, exceeding economists’ expectations, according to a fresh report by the Commerce Department. This marks the highest level of construction spending since December 2007. Despite the negative effects of a strong dollar and falling energy prices, which have undermined the manufacturing sector in the last couple of months, the construction sector is expected to remain on upward trajectory in the last quarter of 2015.
Now, as we mentioned in yesterday’s mortgage report, several Fed officials are scheduled to speak this week about monetary policy and/or economic outlook. One of them is Chicago Fed President, Charles Evans, who is one of the dovish members of the U.S. central bank. In remarks prepared for a speech at Michigan State University on Tuesday, Evans said that he prefers a liftoff in short-term rates at a later date and places more importance on the pace of rate hikes than the actual timing of the first increase. He repeated his views that interest rates should be raised „very gradually” and it would be appropriate for the Fed funds rate to remain under 1% by the end of next year.
Current mortgage rates are rising slowly, and with a possible rate hike on the horizon before the end of the year, the safe play for fence-sitters is to purchase or refinance before rates increase significantly. The latest trends are supporting an increase in short-term rates, and whenever the hike happens, mortgage rates are expected to rise accordingly.
A look at today’s mortgage rates revealed, that Bank of America’s (NYSE:BAC) 30-year fixed home purchase rate currently starts at 4.000%. The 15-year version of this type of home loan is up for grabs at 3.125%.
Borrowers, who are interested in home refinancing options, will see BofA’s 30-year FRM coming out at 4.125% this Tuesday. The 15-year home refinance mortgage is quoted at 3.125%, according to the latest mortgage information.
With regards to San Francisco-headquartered top lender Wells Fargo’s (NYSE:WFC) current mortgage rates, the 30-year fixed home loan is available today at a rate of 4.125%. The shorter-term, 15-year fixed conventional loan is offered at a rate of 3.375%.
Under Wells Fargo’s refinance loan portfolio, the standard 30-year fixed refi loan is advertised at a rate of 4.125% this Tuesday. The popular 15-year home refi mortgage can be locked in at a rate of 3.500% at this lender.
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