Mortgage rates improved for the third consecutive day on Wednesday, as fear of global economic slowdown fueled demand for safe-haven assets, such as U.S. government securities. The bond market had another strong day this mid-week and pricing on mortgage-backed securities (MBS), which lenders use to determine mortgage interest rates increased once again. As a result, a number of lenders updated loan pricing throughout the day with better rates (or atleast maintained yesterday’s gains), while at others the improvements can be seen in the form of lower closings costs or higher lender credit. Current mortgage rates are now hovering near such attractive levels, that we haven’t seen in almost 5 months.
The benchmark 10-year treasury note finished Wednesday’s trading session a yield of 2.06%, which translates to a 1 basis point uptick compared to Tuesday’s data. The longer-term, 30-year treasury note closed the trading day at a yield of 2.87%, an increase of 2 basis points compared to data from a day earlier.
This morning MBS is in the green, as stocks are on the decline. Also, we got a few mixed economic reports (more about them later) earlier this morning, which could have limited impact on financial markets and indirectly on mortgage rates.
National average mortgage rates eased during the week ended Thursday, Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) released earlier today revealed. The federal agency’s survey showed, that on average, lenders were offering the 30-year fixed mortgage at rate of 3.85% nationwide this week, a slightly lower interest rate compared to 3.86% in the prior week. This time a year earlier the 30-year FRM averaged a rate of 4.19%. In case of the 15-year fixed home loan, the average rate ticked down to 3.07% from 3.08% that it carried a week earlier. The same time a year ago, the 15-fixed mortgage loan averaged a rate of 3.36%.
On the other hand, average rates on flexible mortgage loans remained unchanged this week, the government-sponsored enterprise’s data showed. The 5-year treasury-indexed hybrid ARM stayed intact at 2.91% this week. However, the current national average rate on this mortgage is 15 basis points lower compared to data from a year earlier. Similarly, the 1-year ARM retained its average rate from last week, as it’s still stands at 2.53%. At this time last year, the 1-year ARM averaged a rate of 2.42%.
A regional breakdown of the government agency’s latest mortgage survey shows, that the lowest average rate on the 30-year fixed mortgage was measured in the Western region this week, where this type of loan averaged 3.80% with 0.7 discount points. The highest average rate on the 30-year FRM was measured in the Southwest region this week, where this fixed conventional mortgage came out at a rate of 3.90% with 0.5 discount points.
Turning focus to the latest economic headlines, four pieces of notable domestic economic reports saw the light of day this Thursday. While today’s economic data is no that influential, as far as mortgage rates are concerned, compared to Friday’s big jobs report, they provide fresh insights on the performance of the U.S. economy.
Initial claims for unemployment benefits rose by 10,000 to 277,000 in the week ended September 26, according to a report from the Labor Department released on Thursday. The consensus expectation was for a reading of 271,000. Still, the current jobless claims figure reflects a strengthening labor market, as any reading below the key 300,000 threshold indicates an improvement in the job market.
A new survey released by the Institute for Supply Management on Thursday showed, that the ISM Manufacturing Purchasing Manager’s Index hit a two-year low in September. The aforementioned index dipped to 50.2 last month from 51.1 in August, as a result of a strong dollar and weak overseas demand. This is a worse figure than the consensus expectation, which had projected a reading of 50.6. While U.S. manufacturing activity has expanded for 33 consecutive months, the latest reading indicates that the pace of expansion is slowing.
A separate survey released on Thursday by Markit Economics, showed that U.S. manufacturing activity edged up to 53.1 in September, though, the current figure marks the the second-lowest level since October 2013. Economists had projected a reading of 53.0 for September’s Markit PMI.
In other news, U.S. construction spending increased 0.7% in August to a seasonally adjusted annual rate of $1.09 trillion, which marks highest level since May 2008, the Commerce Department reported on Thursday. Economists expected a gain of 0.5% for August’s reading. The latest figure shows that construction activity remains a bright spot, signaling that the housing market can provide a solid support for the economy. Construction spending has been increasing for nine straight months now.
Coming back to today’s mortgage rates, ther recent trend of market movements are supportive for low interest rates, according to our observations. However, tomorrow’s Non-Farm Payrolls report poses a significant risk to low mortgage rates. If the upcoming NFP report turns out much better than expectations, there’s a chance that mortgage rates could spike, and then the last few days of gains could be erased. Therefore, if you are risk-averse it’s a safe bet to lock a rate ahead of tomorrow’s employment report, especially that we haven’t seen such low mortgage rates in months. On the other hand, if you like gambing that mortgage rates will fall after the release of the NFP data, you can always do it, but only float if you can afford to be wrong.
In order to search for live mortgage rate quotes from some of the top U.S. lenders, please click on the link below.