Mortgage rates trickled slightly lower on Friday, finishing this fairly uneventful week on a high note. Actually, current mortgage rates are now hovering near the lowest levels since the beginning of July. The bond market, which ultimately drives mortgage rates, has seen some improvements during the week, with the benchmark 10-year treasury note finishing the week at 2.27%, which translates to an 11 basis points decline compared to data from Monday. As mortgage rates tend to follow the movement of 10-year treasury bonds, chances that now you can see lower mortgage interest rates at your lender compared to those from the beginning of the week. Furthermore, the 30-year treasury yield was also in better shape this week, as it finished Friday’s trading session at 2.96%.
Overall, the whole week was particularly light on economic data, and those that got released didn’t have a significant impact on market movements. Now, during the upcoming week the July FOMC meeting is going to take center stage, and market participants will be watching it closely to get clues on how the outcome of the last couple of week’s domestic economic data fits into the Fed’s thinking regarding interest rate hike. Apart from the upcoming FOMC meeting, the week ahead will be packed with a bunch of important economic data, such as fresh reports on manufacturing activity in the Dallas region, durable goods orders, consumer confidence, Richmond Fed manufacturing index, pending home sales, weekly jobless claims, consumer sentiment, Chicago-region business activity and an initial estimate on second quarter growth.
National mortgage rates on long-term conventional loans dropped this week, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday morning. The federal agency’s survey revealed, that the current average mortgage rate on the 30-year FRM is now clinging at 4.04%, which marks a 5 basis points slide compared to data from a week earlier. The same time a year ago, the 30-year fixed mortgage averaged a rate of 4.13%. The average rate on 15-year fixed loans came in at 3.21% this week, down from the previous 3.26% that it carried the week before. At this time a year earlier, the 15-year fixed mortgage was averaging 3.26%, Freddie Mac’s data showed.
Moving away from fixed-rate conventional loans, the national average rate on the 5-year treasury-indexed hybrid adjustable rate mortgage came in at 2.97% this week, up by 1 basis point compared to data in the prior week. A year ago this type of mortgage was hovering at 2.99%, according to the mortgage-finance company’s statistics. The 1-year ARM was carrying a higher rate as well in the week ended July 23, in the form of 2.54%, which translates to an uptick of 4 basis points compared to last week’s data. The same time a year ago, the 1-year ARM was available at an average rate of 2.39%.
Federal Reserve policy makers are going to meet next week, and investors believe, that the July FOMC meeting will set the stage for a rate hike later this year. The Fed will announce its latest monetary policy decision on Wednesday and publish a statement. The upcoming Fed policy meeting will be the last one before the September gathering, which is when investors and traders expect the U.S. central bank to begin tightening its monetary policy, for the first time since the financial crisis. Since 2008, the Fed has been pursuing a „zero rate interest rate policy”, which is why current mortgage rates are still hovering at extremely low levels. Other market experts believe, that instead of September, the liftoff will be announced at the December FOMC meeting.
Fed Chairwoman Janet Yellen repeatedly said over the last few months that she expects Fed policy makers to act before year-end and increase short-term rates, but the exact timing of a rate hike ultimately depends on the incoming economic data. A number of Fed members chimed in regarding the rate hike last month, and some of them went on to say, that the U.S. central bank should raise rates twice this year, provided that the economic conditions are allowing the liftoff and the inflation target level is met. On the other hand, financial organizations like the World Bank and the International Monetary Fund warned the Fed to hold off on raising rates until early 2016.
Now, the market is readying for the rate increase later this year and we can only hope, that the hike is, at least partially, priced into bonds already, as once the lift in the benchmark federal funds rate happens, mortgage rates are expected to rise as well. Anyhow, mortgage rates remain attractive for now, so if you are looking to get a mortgage these days and you are averse to risk, we suggest you to lock a rate sooner rather than later.
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