Mortgage interest rates sprang up on Monday, as bonds sold off following the release of a set of upbeat economic data. The Institute for Supply Management reported earlier today, that the ISM Manufacturing Index increased to a three-month high in May, in the form of 52.8 compared to a reading of 51.5 in April. Previously, economists had forecast a figure of 51.5. The current reading suggests expansion in the manufacturing sector, a positive sign for the economy ahead of the all-important Employment Report, which is due on Friday.
The stronger-than-expected ISM manufacturing data sparked a selloff in the U.S. treasury bond market, wiping away all the gains mortgage rates enjoyed last week. The selloff in the bond market was also boosted by a round of corporate bond auctions. The yield on the benchmark 10-year treasury note ticked up to 2.190% at the close of the trading day. The 30-year bond yield also rose today, finishing the day at 2.916%.
Another positive economic data saw the light of day on Monday, which revealed that construction spending jumped 2.2% to a seasonally adjusted annual rate of $1 trillion in April, following March’s upwardly revised 0.5% increase. The consensus expectation was for a 0.7% uptick. The current pace of growth in construction spending is the fastest one in more than six years, according to the Commerce Department. A breakdown of statistics shows that residential contruction spending rose 0.6%, while non-residential construction activity surged 3.1% last month. Analysts believe that a rise in contructions could provide a solid support for economic growth.
The latest data from the Commerce Department showed, that personal income inched up, while personal spending came in flat in April. Personal income was up 0.4% last month, compared to the consensus expectation of a 0.3% month-over-month increase. The core PCE deflator, which is a measure of inflation, ticked up 0.1% in April, missing economists’ expectations (an increase of 0.2%).
On the other hand, the Markit U.S. Manufacturing Purchasing Managers’ Index for May came in at 54.0, a downtick compared to April’s 54.5 figure. However, this month’s data is slightly better than the consensus expectation (53.8). A strong dollar is hurting export activity, which plays an influential role holding back the manufacturing industry. New orders dropped to a 16-month low, according to Markit’s data.
Now, with the possibility of a rate hike in June seemingly off the table, investors and analysts are looking for more clues about when the Fed is expected to lift rates. Economists believe if the incoming economic data suggests that the economy is gathering pace, the U.S. central bank may raise rates sooner than expected, which could put an upward pressure on bond yields. Higher bond yields could push up long-term borrowing costs as well, so eventually a rate hike could impact mortage rates badly.
Today’s economic data shows a rebound in some sectors of the economy, which is a positive sign going forward. Now, market analysts are bracing for May’s Non-Farm Payrolls report, which is set to be released on Friday. The Fed is closely wathcing these type of job market figures, which, among other factors, help determine when to lift short-term interest rates. Analysts are projecting a gain of 225,000 new jobs in May, compared to April’s 223,000 jobs. As we said it before, if the upcoming Non-Farn Payrolls data shows some strong numbers, then mortgage rates will rise. However, if the data misses expectations by a significant margin, mortgage interest rates could benefit.
Turning focus to today’s mortgage interest rates at some of the nation’s major lenders, at Citi Mortgage (NYSE:C), the 30-year conventional home loan is published at a rate of 3.625% on Monday. The shorter-term, 15-year fixed counterpart can be secured for as low as 2.875%. Under its refinance loan program, Citi Mortgage is offering the 30-year FRM at a rate of 3.875%, according to the updated loan information. The lender’s 15-year fixed home refi loan is up for grabs at 3.125%.
With regards to current mortgage rates at Wells Fargo (NYSE:WFC), the standard 30-year home purchase loan, which features a fixed interest rate, is coming out at 4.000%. The California-based bank’s 15-year home mortgage is another possible option, and currently it starts at a rate of 3.375%. Borrowers, who are looking to refinance their existing mortgages, will see the lender’s 30-year home refinance loan being offered today at a rate of 4.125%. Others, who believe the 15-year FRM fits the bill better, can expect to pay 3.375% interest cost for this type of mortgage loan.
The above mentioned interest rates are subject to change and are not guaranteed. In order to search for live mortgage rate quotes from some of the top U.S. lenders, please click on the link below. To calculate your monthly mortgage payment, feel free to use our featured mortgage calculator.