Mortgage rates improved slighty late last week as bonds strengthened following the release of some tepid domestic economic data. Government bonds were boosted by a weak retail sales report, while equities dropped on Friday, amid growing expectations that the Federal Reserve will end its zero interest rate policy at the upcoming FOMC meeting in December and hike rates for the first time in almost a decade.
The prospect of a possible monetary tightening next month sent bond prices lower and yields higher since the end of October. According to experts, the increase in bond yields indicates that the bond market has been pricing in the possibility of a rate hike, that could potentially take place in December. These days the majority of lenders are quoting the 30-year fixed mortgage rate in the range of 4.000% – 4.125%. Current mortgage rates are rising and with the market expecting a liftoff in short-term rates in the near future, borrowing costs could go higher moving foward.
In the secondary market, the yield on the benchmark 10-year treasury note, which is a bedrock of global finance, fell by 4 basis points and finished Friday’s trading session at 2.28%. The yield on the longer-term 30-year treasury note declined 3 basis points and closed the trading day at 3.06%.
Pricing on mortgage-backed securities (MBS), which are part of the broader bond market and tend to move in the same direction as 10-year treasury notes, increased on Friday. Therefore you may see some improvements in mortgage rates at your chosen lender, however at the majority of loan providers, the changes can be seen in lower upfront costs or higher lender credit. And those lenders which haven’t fully passed along the gains on Friday are expected to do so this Monday morning.
McLean, VA-based mortgage-buyer, Freddie Mac released its latest weekly national mortgage survey on Thursday, which revealed that the average interest rate on the 30-year fixed mortgage shot up to 3.98% nationwide last week. This marks a 11 basis points uptick compared to data from a week earlier. The 30-year fixed mortgage rate is now at its highest level since July. The same time a year ago, the 30-year FRM averaged a rate of 4.01%. The average rate on the 15-year fixed mortgage increased significantly as well, coming out at 3.20% last week, according to the federal agency’s data. The current mortgage rate on the 15-year fixed mortgage is now 11 basis points higher compared to data in the prior week. Back in 2014, the 15-year fixed mortgage averaged a rate of 3.20%.
Interest rates on flexible adjustable rate loans were also higher in the past week, Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) showed. The average rate on the 5-year treasury-indexed hybrid ARM is currently hovering at 3.03%, up by 7 basis points compared to data from a week earlier. This time a year earlier, the 5-year ARM averaged a rate of 3.02%. Similarly, the national average rate on the 1-year adjustable rate mortgage ticked up last week, and now it’s coming out at 2.65%. Last year, this type of mortgage loan averaged a rate of 2.43%, according to Freddie Mac’s data.
This week’s economic calendar is going to be rich in domestic data. Some of the key reports in the week ahead include fresh data on the housing market and regional manufacturing activity, as well as the release of the Minutes from the Fed’s latest policy meeting. The Minutes, which is scheduled for release on Wednesday, will shed some light on the Fed members’ thinking, how they reached the decision to pass on increasing short-term rates in October.
This Monday the Empire State Manufacturing Index for November is scheduled for release. Following a disappointing reading in October, economists are expecting a pickup in the New York region manufacturing activity this month. However, the index is expected to remain in negative territory for the fourth straight month.
We will also get fresh data on consumer prices this week, as the Labor Department will release its monthly Consumer Price Index on Tuesday. Economists are expecting an uptick of 0.2% month-over-month for October’s CPI. On the other hand, the core CPI, which excludes food and energy prices, likely increased a moderate 0.2% last month, according to the latest projections.
October’s industrial production figures will be published by the Federal Reserve on Tuesday, and economists believe that production increased by 0.1% last month.
Two pieces of influential housing market reports will see the light of day this week. The National Asssociation of Home Builders / Wells Fargo Housing Market Index for November is expected to show a slight downtick in homebuilder sentiment. Back in October, the same index rose to 64 from 61 in September, as outlook on home sales remained favorable.
Another important housing market data will come out this week, in the form of October’s housing starts report. The pace of starts likely declined 3.8% to 1,160 million units last month, according to fresh estimations. On the other hand, the upcoming report on building permits is expected to show an uptick of 3.9% to 1,149 million units. This important housing market indicator on building activity will be released by the Commerce Department on Wednesday.
On Thursday, the Labor Department will publish a fresh reading on jobless claims, which will provide us information about the current state of the labor market. According to the latest forecasts, initial claims for unemployment benefits likely fell by 6,000 to 270,000 from a week ago.
As we mentioned above, this week a few regional manufacturing activity reports are scheduled for release. The Philadelphia Fed’s Manufacturing Business Outlook Survey for October is coming out on Thursday. The latest estimations suggest that regional manufacturing activity in the Philadelphia region improved to -0.8 in November from -4.5 a month earlier.
On Friday, the Kansas City manufacturing activity data will be released and according to the latest projections, the regional manufacturing index likely improved to 0 in November.
Overall, it seems that current mortgage rates are on an upward trajectory, but this week’s economic data could be influential in terms of what direction interest rates will take. However, the market is expecting a rate hike at the December FOMC meeting, and currently it looks more probable that mortgage rates will increase in the near future. With that in mind, if you are averse to risk, we advise you to lock a rate sooner rather than later.
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