Mortgage rates extended their increase for the second straight day following the release of a bullish Fed statement, amid growing fears that the central bank may raise short-term rates at its December policy meeting. U.S. government bonds sold off quickly for the second consecutive session on Thursday, as investors and traders moved away from ultra-safe fixed-income securities to buy riskier assets. Pricing on mortgage-backed securities (MBS), which most directly impact interest rate movement, worsened as well and consequently current mortage rates climbed to their highest levels since the end of September. The average lender is now offering the 30-year fixed mortgage rate in the range of 3.875% – 4.000%, up from the previous 3.75% – 3.875% we have seen earlier this week.
At the close of Thursday’s trading session the yield on the benchmark 10-year treasury note was at 2.19%, up 9 basis points compared to data from a day earlier. As mortgage interest rates tend to follow the direction of the 10-year treasury yield, you may see an uptick in today’s mortgage rates at your favorite lender. The longer-term 30-year treasury note rose significantly as well, finishing the trading day at 2.96% versus the previous 2.87% that it held.
On Friday morning MBS pricing is in the green, following the release of some mixed domestic economic data (more on these reports later on). If MBS bounces back, it could push lenders to revisit their rate sheets with lower mortgage rates. And this could be a relief for rates following the upticks in the last few days.
30-year fixed mortgages averaged a rate of 3.76% this week, down 3 basis points compared to data in the prior week, Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) showed. The 15-year fixed loan stayed frozen at 2.98% this week, according to the mortgage-finance company’s survey. On the other hand, average rates on flexible adjustable rate mortgages were mixed in the said period. The 5-year treasury-indexed hybrid ARM remained unchanged at a rate of 2.89%, while the 1-year ARM ticked up 8 basis points to 2.62% in the week ended October 29.
Looking at the regional breakdown of current national mortgage rates, the lowest average rate on the 30-year fixed mortgage was measured in the Western region this week, where it came out at 3.71%. As far as the highest 30-year fixed mortgage rate is concerned, it was measured in the Southeast region in the form of 3.83%, according to the federal agency’s survey.
Turning focus to today’s economic reports, three pieces of fresh data got released in the form of Personal Income and Outlays, Chicago PMI and Consumer Sentiment. The Commerce Department reported on Friday, that consumer spending inched up by a seasonally adjusted 0.1% in September, missing forecasts of a 0.2% gain, the smallest pace of growth since the beginning of the year. Personal income was also up by 0.1% last month, following an upwardly revised 0.4% increase in August. Economists had projected an increase of 0.3% for September’s personal income reading. Personal consumption expenditures (PCE), which is the Fed’s preferred indicator for measuring inflation, contracted 0.1% in September, the first decline since January. In the past 12 months the PCE price index has risen only 0.2%.
Manufacturing activity in the Midwest increased in October, after big gains in production and new orders, according to the the latest Chicago Purchasing Management Index released earlier this Friday. The index rose to a level of 56.2 in October, following a 48.7 reading in September. The consensus expectation was for a reading of 49.0. This is a positive report as any reading above 50 signals expansion in the sector.
According to another report released today, the University of Michigan’s final reading on October’s consumer sentiment index came in at 90.0, which is higher than September’s figure of 87.2. The data suggests that Americans are more upbeat about the economic outlook. As U.S. household spending is a driving force behind the economy, this is clearly a positive report from a broad perspective.
In other news, San Francisco Fed President John Williams said in an interview with The Associated Press on Friday, that the U.S. central bank hasn’t made a decision regarding the timing of a rate hike. Williams, who is a voting member of the Fed, stated that he wants to study more economic data in the coming weeks in order to decide whether the economy could weather a rate liftoff. According to Williams, the reason why the Fed mentioned December as a possible date for a rate hike in its latest policy statement, is that the central bank wants financial markets to be ready for a monetary tightening, whenever it happens.
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