Mortgage rates fell on Friday, as weaker-than-expected economic data lifted mortgage-backed securities (MBS), which most directly influence interest rate movement. Overall, mortgage interest rates closed the week at similar levels seen a week earlier, as the improvements on Friday were enough to offset the weakness in rates earlier in the week. A disappointing reading on Q4 GDP sent mortgage rates lower on Friday, and a number of lenders updated their mortgage pricing with lower rates. While the most prevalently quoted interest rate on the 30-year fixed mortgage remains around 4.25%, the upfront costs can now be lower at some lenders. At the same time, a few mortgage loan providers are now offering this type of loan for as low as 4.125%.
In the secondary market, the benchmark 10-year treasury bond closed Friday’s trading day at a yield of 2.49%, down 2 basis points compared to data from a day earlier. This marks the second straight day that the yield on the 10-year note is tumbling. A weekly comparison of 10-year treasury yields show, that currently the yield on this type of government bond is 1 basis point higher compared to data in the prior week. As mortgage rates typically follow in the footsteps of the 10-year treasury note, there’s a chance borrowers will see lower interest rates or at least lower upfront costs at certain lenders. With regards to the longer-term, 30-year treasury bond, it finished Friday’s trading session at a yield of 3.06%, a decrease of 2 basis points from a day earlier.
Pricing on MBS is slightly in the positive territory this Monday morning, which could help today’s mortgage rates. Still, a few economic reports are scheduled for release later today, and if they miss expectations, there’s a chance interest rates could benefit.
Mortgage interest rates drifted higher across the board last week, according to McLean, VA-based Freddie Mac’s latest mortgage survey. The federal agency’s weekly Primary Mortgage Market Survey (PMMS) released Thursday showed, that on average lenders were offering the 30-year fixed mortgage at a rate of 4.19% nationwide, in the week ended January 26, an increase of 10 basis points compared to data in the prior week. The current average rate on the shorter-term, 15-year FRM is now 3.4%, an uptick of 6 basis points, according to Freddie Mac’s latest survey. On the other hand, the flexible 5-year ARM was carrying a rate of 3.2% last week, slightly down from the previous 3.21% a week earlier.
As far as today’s economic data is concerned, one piece of fresh domestic report got released, in the form of Personal Income and Outlays for December. The Commerce Department reported earlier this Monday, that consumer spending inched up by a seasonally adjusted 0.5% in December, which is in line with expectations. Personal income was also up by 0.3% last month. Economists had projected an increase of 0.4% for December’s personal income reading. Personal consumption expenditures (PCE), which is the Fed’s preferred indicator for measuring inflation, increased 0.2% in December. Other domestic economic reports slated for release today including the Dallas Fed Manufacturing Survey for January and the National Association of Realtors’ Pending Home Sales Index for December.
The week ahead is going to be packed with several influential domestic economic data, with the U.S. January Nonfarm Payrolls report being the highlight of the week. The upcoming Employment Situation report, which is scheduled for release on Friday, is going to be the first one under President Donald Trump. The consensus expectation is that U.S. employers likely added 171,000 jobs last month, following an uptick of 156,000 jobs a month earlier. Econmists also believe that jobless rate is holding steady at 4.7%, while average hourly earnings likely increased 0.3% in January.
A strong NFP report would support the case of a rate hike in the coming months. However, if the January jobs report comes with some weak figures, we should see a rally in the bond market, that could eventually lead to an improvement in mortgage rates.
Other important economic reports scheduled for release this week include fresh data on ADP Employment on Wednesday and weekly jobless claims on Thursday.
The Federal Reserve will begin its two-day policy meeting on Tuesday. While economists don’t expect the Fed to increase rates at this week’s policy meeting, investors and traders will be closely watching for any hints on future U.S. monetary policy.
Current mortgage rates are just as good as a week earlier. However, if you are in the process of getting a mortgage and you are averse to risk, we suggest you to lock a rate sooner rather, as the long-term trends point to higher mortgage rates. However, if you aren’t concerned about the Fed’s rate hike plans or you simply gamble on lower mortgage rates in the next few weeks, you can always float, but only float if you can afford to be wrong.