U.S. treasury bonds gained on Wednesday, thus current mortgage rates are slightly lower than yesterday, as worries over Greece’s debt crisis renewed, which drove investors to safe-haven assets. Following a two-day selloff earlier this week, the bond market strengthened today, as reports emerged that late-stage bailout talks between Greece and it s creditors have stalled on Wednesday. In bond market-related news, the Treasury Department auctioned $35 billion in five-year notes at the highest yield since December, which met with soft demand.
During today’s trading session tha yield on the benchmark 10-year treasury note dipped to 2.38%, a 4 basis points decline compared to Tuesday’s 2.42%. The yield on the long-term 30-year treasury note finished the day 4 basis points lower than yesterday, and it’s now hovering at 3.16%.
Despite today’s market improvements lenders remained cautious with revising their rate sheets with lower rates. The most reasonable explanation for lenders being conservative with repricing is the extremely volatile environment that the U.S. bond market has been experiencing lately. Lenders mainly rely on the prices of mortgage-backed securities (MBS), in determining mortgage rates and today the pricing on MBS ticked up. Today’s MBS prices would have suggested a bigger improvement in mortgage rates, but in the current volatile environment, which supports higher mortgage rates, it’s somewhat understandable that lenders are more cautious with repricing. Still, chances that you can see slightly lower mortgage interest rates today at your lender, compared with rate levels on Tuesday.
Now, moving on to today’s economic calendar, the Commerce Department released the final estimation for Q1 GDP. According to the third revision, the U.S. economy contracted at a seasonally adjusted annual rate of 0.2% in the first quarter of 2015, instead of the 0.7% pace of decline reported last month. The current figure is right in line with expectations. The economy expanded at a 2.2% annual rate in Q4 2014. The Commerce Department’s data showed that a harsh weather, a strong dollar, a decline in energy prices were some of the factors that led to a poor performance in the first quarter of 2015.
Looking at current average mortgage rates, financial company Zillow reported earlier this week, that the interest rate on the 30-year fixed mortgage climbed 2 basis points to 3.95% during the wraparound week ended on Tuesday. At Zillow Mortgages the rate on the 15-year fixed mortgage is currently hovering at 3.04%, while the 5/1 adjustable-rate loan is coming out at 2.82%. By taking a look at mortgage rates by state, the company’s data revealed that the biggest weekly increase in 30-year mortgage rates took place in Florida and Illinois. In Florida, the average 30-year fixed mortgage rate is now hovering at 4.00%, while in Illinois the same type of mortgage loan is available at an average rate of 3.94%. Now, in California the 30-year FRM came in at an average rate of 3.95% during the wraparound week, an uptick of 2 basis points compared to last week, according to Zillow’s data.
Another company, HSH.com reported this week, that the average rate on 30-year conforming residential mortgages decreased by 2 basis points, according to the firm’s latest Weekly Mortgage Rates Radar covering the Wednesday-to-Tuesday wraparound week. HSH.com’s weekly survey also showed, that the average rate on 5/1 Hybrid ARMs also improved by 2 basis points in the said period, and it’s currently sitting at 3.06%.
Headlines about Greece’s debt crisis remain a main market driver, which generate price swings and volatility in financial markets. U.S. domestic economic data also impacts markets, thus mortgage rates as well, but at a lesser extent these days than the news on Greece’s bailout talks. With that in mind, if Greece’s debt negotiations with its creditors eventually fall apart, which has the potential to spark a broad market turmoil, it could lead to lower mortgage rates in the U.S. If you are a gambler, who can tolerate high risk for a big reward, then you may want to float ahead and see what happens.
However, if you are averse to risk, and expect that the situation over Greece’s debt crisis will be resolved until deadline, the U.S. economy continues to strengthen, thus leaving the door open for higher mortgage rates in the upcoming weeks, then you better lock a rate these days. The current market environment supports the upward trend for mortgage rates, and with the Fed rate hike looming this year, it’s unlikely to see rates falling back to extremely low levels in the near future.
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