Mortgage rates headed lower at the end of last week, as a result of a couple of disappointing domestic economic reports, including September’s Non-Farm Payrolls data. Following the release of the weaker-than-expected NFP report, which was generally poor across the board, pricing on bonds – such as mortgage-backed securities (MBS), which are crucial in determining daily mortgage rates – ticked higher, which prompted several lenders to send out new rate sheets with better loan pricing. Right now, a number of lenders are offering the 30-year fixed mortgage rate at 3.750%, while some of the more agressive loan providers offer the same type of loan at a rate of 3.625%. This is a lower mortgage rate compared to rates from any other day of the week.
Although, bond markets, which underlie mortgage rates, have lost some ground later during Friday’s trading session, interest rates have remained quite attractive as of Monday morning. Current mortgage rates are hovering near 5-month lows, which is good news for those borrowers sitting on the fence, as they have another golden opportunity to take advantage of the recent gains.
As far as treasury yields are concerned, the benchmark 10-year treasury note finished Friday’s trading day below 2%, at 1.99%, as a result of a disappointing Employment Situation report, which bolstered expectations among market participants, that the Federal Reserve could delay its planned rate hike until next year. The current figure marks the lowest yield on this type of government bond in more than a month. The longer-term, 30-year treasury yield closed Friday’s trading session at a lower level as well, in the form of 2.82%, which translates to a 3 basis points decline compared to data from a day earlier.
This morning mortgage-backed securities are in the red, as a rally in equitities and a disappointing ISM services data have a negative impact on MBS pricing. Currently, bonds are selling off, and if we don’t see a reversal later on, there’s a chance we may see higher mortgage rates at the end of the day.
McLean, VA-based government-sponsored agency, Freddie Mac published its weekly national Primary Mortgage Market Survey (PMMS) on Thursday, and according to the results, the national average rate on the 30-year FRM drifted lower 1 basis point to 3.85% last week. The average rate on the 15-year fixed mortgage eased a bit as well during the past week, and it’s now clinging at 3.07%. A week earlier the same type of mortgage averaged a rate of 3.08%. It’s important to note that Freddie Mac’s weekly survey contains data that are collected during the earlier part of the week and doesn’t reflect the market movements and the impact of economic headlines that see a release later on. As Friday’s influential jobs report came out with some disappointing figures, chances that you may see even lower average mortgage rates in the upcoming Freddie Mac survey.
Just last week, ahead of the release of September’s big jobs report, a couple of top Fed officials chimed in with their opinions regarding the U.S. central bank’s plans on raising short-term rates. Almost all of these Fedspeaks pointed to a rate increase in late 2015, provided the economy performs well and inflation target levels are met. However, the recent set of mixed economic reports, including a poor NFP data and Factory Orders report, as well as some rather tepid regional manufacturing activity figures are boosting expectations of a delayed interest rate hike.
As we reported on Friday, the disappointing jobs data raises some questions about the health of the labor market. Now, a growing number of investors and traders believe that the U.S. central bank will hold off on increasing short-term rates until early 2016. According to the latest CME FedWatch data, the probability of a monetary tightening in October is just 6%, while the expectation of a rate hike in December is 31%.
The week ahead is going to be light on influential economic data, but some other interesting events will take place, including the release of the minutes from the Fed’s latest policy meeting, some bond auctions, fresh data on international trade, the latest ADP employment report, weekly jobless claims, which could impact mortgage rates.
On Monday, one piece of domestic economic data was released, in the form of September’s ISM Non-Manufacturing Survey. Although, the index dropped 2.1 points to 56.9 last month, economic activity outside the manufacturing sector remained in positive territory, as any readings above 50 indicates growth in the sector. Economists had projected an increase of 58.0 for the latest ISM services data.
So mortgage rates are dropping again, and currently they are sitting at the best levels since about April. If you are happy with current loan pricing, you may want to lock in the recent gains. With not much significant data in line for release this week, there’s a chance the gains may hold, but you never know. The bottom line is, if you are looking for a mortgage loan these days, you should seriously consider taking advantage of current low mortgage rates. On the other hand, if you feel that floating is worth the gamble, to see whether mortgage rates could fall even lower, you can always do that, but always be cautious with floating, especially if you are averse to risk.
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