Current mortgage rates are hovering at lower levels as we head into the weekend, following a rally in the bond market in the last two days. On Friday, several lenders updated their rate sheets with more attractive interest rates and those, who haven’t passed along the gains yet, are expected to do it by Monday morning. The improvement in mortgage rates was fueled by a set of weak domestic economic data and the stabilization of European government bonds in the last two days of the week. Although, for the majority of the week, it looked like momentum and market sentiment are against low mortgage rates, thus rates headed to the highest levels of 2015, but at the end of the week they managed to catch a break. Whether this is a temporary break or a longer-term consolidation, we have yet to see. However, if you are currently in the market for a new mortgage loan, it’s probably better to lock sooner rather than later, especialy if you can’t handle the risk of rates rising up in the near future.
As we have seen it in the first three days of the week, concerns over the European economy and bond market had a bigger influence on U.S. mortgage rates, than domestic economic data.
It certainly looked like that the market is moving independent of economic reports, whether the data turned out exceptionally good or worse-than-expected. Even that some of the domestic economic data, that got published earlier in the week, appeared to be quite soft, they had little impact on mortgage rates. However, on Thursday and Friday the momentum has changed. The yield on the benchmark 10-year treasury note dropped, mortgage bonds rallied and eventually mortgage rates came down to lower levels.
Now, let’s take a look at this week’s U.S. economic reports and see how they impacted mortgage rates. March’s Job Openings and Labor Turnover survey dropped by 2.9 percent to a seasonally adjusted 4.99 million, compared to February’s 5.144 million, the Labor Department reported on Tuesday. This is not very good news for the job market, especially that February’s JOLTS report showed job openings at a 14-year high. As far as other aspects of March’s data is concerned, total hiring ticked up 1.1 percent to 5.1 million. This marks the highest number for total hiring since December. This is a mixed report at best, which eventually didn’t really have an effect on rate movement.
On Wednesday, the Commerce Department released April’s retail sales numbers, which turned out to be disappointing, showing no signs of a rebound for the economy in the second quarter. Retail sales remained flat in April, falling short of the consensus expectation of 0.2% increase. Core retail sales, which don’t take automobiles and gas into account, rose 0.2%. However, this figure also missed the consensus expectation of 0.5% uptick. Normally, weak numbers like this have a positive influence on mortgage rates, but it was not the case this time. Following the release of April’s retail sale data, mortgage-backed securities (MBS) improved, then quickly dropped, eliminating all chances for an improvement in mortgage rates.
Moving on to Thursday’s economic reports, initial claims for unemployment benefits slipped by 1,000 to a seasonally adjusted 264,000 last week, the Labor Department said. Economists had forecast a reading of 276,000. On the other hand, April’s producer price index decreased 0.4% compared to March’s 0.2% increase, according to a report released on Thursday. Core prices, which exclude volatile food and energy categories, were down 0.2%. These are mixed data, and as it turned out, they didn’t really push mortgage rates to any direction.
Finally, on Friday we got three more sets of weak economic data, in the form of April’s Empire State Manufacturing Index, industrial production data and consumer sentiment report. The New York Fed’s Empire State Manufacturing Index for May showed, that business activity in the New York region’s manufacturing sector edged up 3.1 from April’s -1.2. Economists had forecast a reading of 5, so the current data is below expectations.
Another report from Friday showed, that U.S. industrial production was down 0.3% in April, indicating a weak demand in the global market. The consensus expectationg was for a reading of no growth. The current data showed, that industrial production has been on a downward trajectory for the fifth straight month.
The preliminary reading from the University of Michigan revealed, that consumer sentiment in May dipped to a seven-month low, according to a new reported released on Friday. This month’s consumer sentiment index came in at 88.6, a disappointing figure compared to April’s data (95.9). Previously, analysts had forecast a reading of 96 for May’s consumer sentiment index.
Following the release of these three reports, bonds had a nice rally and mortgage rates improved at the end of the day. While it’s encouraging to see the improvements in the last two days, the question remains, whether rates can maintain current levels or more volatility is on the way.
Back on Thursday, Freddie Mac published the results of its weekly Primary Mortgage Market (PMMS) survey. According to the latest findings, the 30-year fixed mortgage increased to 3.85% this week. In the prior week, this type of mortgage loan averaged a rate of 3.80%. The survey also revealed, that the average rate on the 15-year FRM shot up to 3.07% from the previous 3.02% that it carried.
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