Mortgage rates were in a holding pattern on Thursday, with the yield on 10-year treasury notes closing at a one-month high, as investors have moved away from ultra-safe haven assets. Interest rates weren’t able to build on Wednesday’s modest improvements, however, today’s net changes are so small, that most borrowers probably won’t notice the uptick. On the other hand, lower bond prices drew a strong demand for today’s 30-year bond auction. During Thursday afternoon the Treasury Department auctioned $13 billion in 30-year bonds at a yield of 2.980%. The strong demand for 30-year bonds came on the heels of Wednesday’s $21 billion auction of 10-year treasury bonds, which were sold at a yield of 2.235%.
At the end of today’s trading session the yield on the benchmark 10-year treasury note increased to 2.23%, which marks a 2 basis points uptick compared to data from a day earlier. The yield on the long-term 30-year treasury note ticked up as well, finishing the trading day at 2.98%, which translates to a 2 basis points increase compared to Wednesday’s data. As mortgage rates tend to follow the movement of 10-year treasury notes, today’s mortgage rates are slightly higher compared to those in the mid-week.
Now, as far as national mortgage rates are concerned, McLean, VA-based Freddie Mac published its weekly Primary Mortgage Market Survey (PMMS) earlier this Thursday, which showed, that the average interest rate on the 30-year fixed mortgage barely budged, finishing the week at 3.90%. This marks a 1 basis point uptick compared to data from a week earlier. According to the federal agency’s latest findings, the average rate on the 15-year fixed mortgage was also slightly higher this week, coming out at 3.1% versus 3.09% last week.
A regional breakdown of Freddie Mac’s latest mortgage survey, shows that the highest average rate on the 30-year FRM was measured in the Southwest region, where this type of conventional loan averaged a rate of 3.96% this week, with 0.5 discount points. On the other hand, the lowest average rate was measured in the Northeast region, according to the organization’s latest survey. In the Northeast region, the current mortgage rate on the 30-year fixed conventional loan is 3.90% on average, which comes with 0.6 discount points.
With the second week of every month usually being slow in terms of economic data, we don’t anticipate a big influence of domestic economic reports on mortgage rates this week. And with the Federal Reserve’s upcoming policy meeting going to take place next week, it’s unlikely to see large net changes in mortgage rates in the meantime. In such a market environment, investors and traders will likely stay in a wait-and-see mode until the Fed’s announcement.
Only one piece of notable domestic economic data saw the light of day on Thursday in the form of weekly jobless claims. According to the Labor Department’s latest figures, the number of Americans filing for unemployment benefits fell 6,000 to a seasonally adjusted 275,000 last week, which is iline with economists’ expectations. Also, this marks the 27th consecutive week, that applications for initial jobless claims remained below the 300,000 threshold, which indicates that the labor market is strengthening.
Speaking of the Fed and it’s pending rate hike, it’s a tough call to say whether the U.S. central bank may raise rates in September or delay the tightening for a later date. While the labor market has been gaining momentum in the last couple of months, the current inflation level is still way off from the Fed’s target. While earlier in the summer most analysts expected a rate hike to take place in September, the recent turmoil in global markets has raised concerns about the timing of the tightening.
Now, some market participants are worrying that the liftoff in rates may happen at the wrong time, when global economic growth decelerates. In the last few months, Fed Chairwoman Janet L. Yellen repeatedly said, that she expects Fed policymakers to raise short-term rates before year-end, the first time since 2006. However, the exact timing of a rate hike depends on the incoming economic data, she added. The Fed has been pursuing a zero rate interest rate policy since 2008, which is why current mortgage rates are still hovering near historical lows.
Earlier this week, a World Bank top official said, that the Federal Reserve risks “panic and turmoil” in emerging markets if it takes action and increase short-term rates as early as September. World Bank chief economist Kaushik Basu warned the U.S. Central Bank, that it should delay its planned interest rate increase until global markets calm down and volatility fades away.
If you are looking for a mortgage these days, and you are risk-averse, it’s probably better to lock in a rate sooner rather than later. Nobody knows whether the Fed may pull the trigger at its September policy meeting and start raising short-term rates. However, once the liftoff happens, and we believe the Fed intends to hike rates sometime before the end of the year, mortgage rates will rise accordingly.
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