Current Mortgage Rates Roundup for May 16, 2016: What to Expect from the Week Ahead?

Mortgage rates moved lower on Friday, as U.S. government bonds rallied following some better-than-expected domestic economic data. Treasury yields fell on Friday, after briefly rising on strong retail sales data, as investors believe the Fed will keep interest rates unchanged at its upcoming monetary policy meeting in June, amid concerns about slowing global growth and tepid inflation. Pricing on some of the bond-like financial instruments, such as mortgage-backed securities (MBS), which most directly influence interest rate movement, improved on Friday. According to our observations, the current mortgage rate on 30-year fixed conventional mortgages ranges between 3.5% – 3.625% at the majority of loan providers.

In general, last week was favorable for mortgage interest rates, as they hit 3-year lows at the beginning of the week. Naturally, this brings fence-sitters yet another golden opportunity to take advantage of the ongoing low rates. Though, rates somewhat increased later on in the week, they did a good job managing to recover some of the losses on Friday. The bottom line is that current mortgage rates are just as good as rate levels a week earlier.

In the secondary market, the 10-year treasury note closed Friday’s trading session at a yield of 1.71%, down 4 basis points compared to data from a day earlier. On the other hand, the yield on the long-term 30-year treasury bond came in at 2.55%, a downtick of 5 basis points, according to the latest market data. The bond market is a driving force behind mortgage rates and the 10-year note is a key factor when it comes to determining daily rate levels. As interest rates typically follow the movement of 10-year treasury bonds, you may see slight improvements in interest rates at some lenders this Monday. However, the changes most likely would be rather marginal and they would affect closings costs as opposed to contract rates.

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National mortgage rates dropped last week, according to government-sponsored enterprise Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS). The McLean, VA-based federal agency’s survey showed, that the average interest rate on the 30-year fixed mortgage nudged lower 4 basis points to 3.57% nationwide in the week ended May 12. This time a year earlier the 30-year FRM averaged 3.85%. The current rate on this type of loan is the lowest in three years. In case of the shorter-term, 15-year fixed mortgage, the current average rate is 2.81%, down 5 basis points compared to 2.86%, that it carried in the prior week. Still, it’s important to note that Freddie Mac’s weekly survey captures rate quotes from the first half of the week. Also, the survey doesn’t reflect the market movements and the impact of economic headlines that see a release later on in the week.

Now, looking at the unfolding week’s economic calendar, it’s going to be packed with several housing market and manufacturing activity data, the release of the Minutes from the Fed’s latest monetary policy committee meeting, as well as public speeches of top Fed members. On Monday, the Empire State Manufacturing Index for May is scheduled for release. Following a jump in manufacturing activity in the New York region last month, economists are forecasting a slowdown this month. However, the index is expected to remain in positive territory, according to experts.

Another economic data, that is scheduled for release on Monday is the National Association of Homebuilders Housing Market Index for May. The consensus expectation is a reading of 59 for May’s housing market index.

The second day of the week won’t be short of action on the economic front, as a few domestic economic data is going to be released, including a fresh reading on housing starts and building permits. The pace of housing starts likely incresed 3.3% to a seasonally adjusted 1,125 million units in April, according to fresh estimations. On the other hand, the upcoming report on building permits is expected to show an uptick of 5.4% to 1,134 million units.

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We will also get fresh data on consumer prices this week, as the Labor Department will release its monthly Consumer Price Index on Tuesday. Economists are expecting an increase of 0.4% month-over-month for April’s CPI. On the other hand, the core CPI, which strips out food and energy prices, likely increased a moderate 0.2% last month, according to the latest projections. If the upcoming inflation data comes out stronger-than-expected, a rate hike in June could possibly come back into play.

The U.S. industrial production data for April will see the light of day on Tuesday. Analysts believe that industrial production rose 0.2% last month, following a 0.6% drop a month earlier.
On Wednesday, market participants will turn their attention to the release of the Fed’s Minutes from its latest monetary policy meeting. Investors will look for clues in the U.S. central bank’s’ language as to when markets should expect the Fed to continue tightening monetary policy.

A day later, on Thursday, the Labor Department will publish a fresh reading on jobless claims, which will provide us information about the current state of the labor market. According to the latest forecasts, initial claims for unemployment benefits likely fell by 19,000 to 275,000 from a week ago.

Two pieces of regional manufacturing reports are set to be released on Thursday, in the form of the Philadelphia Fed’s Manufacturing Business Outlook Survey for May and the Chicago Fed’s National Activity Index for April. According to forecasts, manufacturing conditions in the Philadelphia region likely improved to 3 this month from the previous -1.6 figure in April. It will be also interesting to see the outcome of the upcoming Chicago Fed National Activity Index, as back in March the index ticked down to -0.44.

The National Association of Realtors will release April’s existing home sales data on Friday. Existing home sales for April likely climbed 1% to a seasonally adjusted annual rate of 5.38 million units, analysts say. Back in March, existing home sales rebounded 5.1% to a seasonally adjusted annual rate of 5.33 million units.

As mentioned before, a couple of Fedspeaks will take place during the week, with Minneapolis Fed President Neel Kashkari hosting a town hall discussion on Monday evening. Then San Francisco Fed President John Williams and Atlanta Fed’s Dennis Lockhart will take the stage on Tuesday, as they will participate in a Politico panel about the future of the U.S. economy. The same day Dallas Fed President Robert Kaplan will participate in a moderated Q&A before a community forum. New York Fed Governor William Dudley will deliver a speech on macroeconomics trends on Thursday. These speeches will be closely watched by investors and traders, as they could shed some light on the top policymakers’s views regarding future rate hikes.

Coming back to mortgages, interest rates found their footing recently, and once again they are hovering near historic lows, which means borrowers can take advantage of current low mortgage rates to buy a new home or refinance an existing loan. However, all the above mentioned upcoming economic events can impact mortgage rates in one way or another, so it will be interesting to see what direction rates will take this week.

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