Mortgage rates headed slightly lower on Monday, which marks the fourth straight day that interest rates avoided moving higher. Demand for U.S. bonds increased on Monday, however mortgage bonds, such as mortgage-backed securities (MBS), traded in a narrow range. Pricing on MBS, which lenders use to determine daily mortgage interest rates, rose slightly, thus current mortgage rates look slightly more attractive compared to those from a day earlier. At the majority of lenders the improvements can be seen in lower upfront costs or higher lender credit, instead of lower contract rates. The average lender is quoting the benchmark 30-year fixed mortgage rate at 4.000%, as of this writing.
As we mentioned above U.S. government bonds were in a better shape in the beginning of the week, with the yield on the 10-year treasury note closing Monday’s trading session at 2.27%, down 1 basis point from the previous 2.28%. The long-term 30-year treasury yield finished the trading day at 3.07%, which translates to a 1 basis point uptick compared to data from Friday.
Now, this Tuesday morning MBS prices are inching lower, following the release of some upbeat domestic economic data. If pricing on MBS remains low, there’s a chance that we may see higher mortgage rates at the end of the day.
Current mortgage rates are on an upward trajectory nationwide, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS). The government-sponsored enterprise’s weekly survey showed, that the average interest rate on the 30-year fixed mortgage drifted higher to 3.98% last week. The same type of mortgage was hovering at 3.87% a week earlier. The average rate on the 15-year fixed mortgage had a significant uptick as well, as it came out at 3.20% last week. This type of loan carried a rate of 3.09% in the prior week, according to Freddie Mac’s data.
Now, looking at this week’s domestic economic data, manufacturing activity in the New York region remained in negative territory, according to the Empire State general business conditions index released on Monday. Although, the index inched up to -10.7 in November from -11.4 in October, the current reading still indicates contraction in the sector. This marks the fourth consecutive month that the index shows contraction in the New York-area manufacturing sector.
This Tuesday a healthy batch of domestic economic data saw the light of day, some of which may have influence on today’s mortgage rates. The Labor Department released its monthly Consumer Price Index earlier today, and the latest reading showed that consumer prices in the U.S. increased a modest 0.2% in October, matching economists’ expectations. As the monthly changes of this indicator represent the rate of inflation, this month’s uptick could offer more support to expectations that the Federal Reserve will lift short-term rates at its upcoming policy meeting in December. The core CPI, which excludes food and energy prices, rose 0.2% in October, following a similar gain a month earlier.
On the other hand, industrial production dipped 0.2% in October, according to a fresh report released today by the Fed. The consensus expectation was for a reading of a 0.1% increase. This marks the second straight month that industrial production is down. The report also showed that manufacturing output grew 0.4% last month.
A fresh housing market data released today showed that homebuilder sentiment slightly declined in November, but builders still view sales conditions as good. Economists expected a reading of 64 for the National Association of Home Builders / Wells Fargo Housing Market Index for November, but the actual reading came in at 62. Although, the current figure is a bit disappointing after five straight months of gains, the housing sector remains a relative bright spot for the U.S. economy.
The latest reading on consumer prices could give further boost for the Fed to raise rates in December, as inflation inches closer to the Fed’s target level of 2%. According to the CME FedWatch tool, which is used by investors and traders to predict future monetary policy, the market is currently pricing in a 68% chance of a rate hike in December. While nobody knows whether the Fed will end its zero interest rate policy at the upcoming FOMC meeting, whenever the liftoff happens mortgage rates are expected to rise as well. With that in mind, if you are looking to purchase a new or used home or interested in refinancing your existing mortgage, probably it’s a wise decision to lock a rate sooner rather than later.
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