Mortgage rates rates headed higher for the fifth straight day on Wednesday, as pricing on mortgage-backed securities (MBS) fell, following the release of an upbeat retail sales report and a better-than-expected inflation data. With that said, current mortgage rates are now hovering at the highest levels in three weeks. On average, lenders are quoting 30-year fixed conventional mortgages at a rate of 4.250% in the best scenarios, but some of the more agressive loan providers are offering it for as low as 4.125%, according to our observations.
U.S. treasury bonds lost some more ground on Wednesday, following weakness a day earlier. The top-rated 10-year treasury yield finished the trading session at 2.51%, which translates to an increase of 4 basis points compared to Tuesday’s data. Overall, the yield on the benchmark 10-year treasury bond jumped 8 basis points since the beginning of the week. The yield on the longer-term, 30-year treasury bond also crept up yesterday, closing the trading day at 3.09%, up 2 basis points compared to data from a day earlier.
Despite today’s better-than-expected domestic economic reports (more on that later), MBS pricing is on the rise this Thursday morning, which means mortgage rates could benefit. If mortgage interest rates manage to avoid moving higher today, that would end a five-day losing streak.
Mortgage interest rates are on a downward trajectory nationwide, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday. The federal agency’s survey showed, that the average interest rate on the 30-year fixed mortgage ticked down 2 basis points to 4.15% in the week ended February 16. On average, mortgage lenders across the country were offering the shorter, 15-year fixed conventional loan at a rate of 3.35% this week, a decrease of 4 basis points compared to data in the prior week. Moving away from fixed conventional mortgages, the more flexible 5-year ARM fell 3 basis points to a rate of 3.18% this week, the Virgnia-based housing giant’s data revealed.
As far as today’s domestic economic calendar is concerned, three pieces of data got released. U.S. housing starts pulled back in January, as the construction of multi-family housing projects dropped, according to the Commerce Department’s report. Housing starts dipped by 2.6% to a seasonally adjusted annual rate of 1.246 million units last month. However, at the same time December’s housing starts figure was revised up to an annual rate of 1.28 million units and building permits rose 4.6% to a rate of 1.29 million units in January, suggesting that the housing market’s recovery is still on track.
The number of Americans filing for unemployment benefits for the first time increased by 5,000 to a seasonally adjusted 239,000 last week, according to the Labor Department’s data. Economists had forecast jobless claims to climb to 245,000. The modest increase in the number of first-time claims comes after jobless claims fell to their lowest levels in three months in the previous week. Low numbers of jobless claims point to a strengthening in the labor market.
Manufacturing conditions in the Philadelphia region improved significantly in February, coming in at 43.3, soaring past economists’ forecast of 18.0, according to the Philly Fed’s Manufacturing Business Outlook Survey revealed Thursday. This is an encouraging report, indicating that economic activity in the manufacturing sector is picking up.
The current week is full of Fedspeaks and yesterday several U.S. central bank officials were scheduled to make public speeches. New York Fed chief William Dudley said on Wednesday, that the U.S. central bank aims to increase short-term rates in the months ahead, provided the economic outlook remains positive and fiscal policies give a boost. Dudley added, that „We expect to gradually remove further monetary policy accommodation and snug up interest rates a little bit further in the months ahead,”.
Another top U.S. policymaker, Boston Fed President Eric Rosengren said in prepared remarks on Wednesday, that skepticism among market participants won’t delay rate hikes. Rosengren anticipates three or more rate increases to take place in 2017. He said, „It is my view that it will likely be appropriate to raise short-term interest rates at least as quickly as suggested by the Fed’s current…median forecast, and possibly even a bit more rapidly than that forecast,”.
Philadelphia Fed President Patrick Harker reiterated his views on interest rate policy on Wednesday, saying that three rate hikes would be appropriate this year, assuming the economy stays on track. In a speech at La Salle University, Harker said, that inflation should reach the Fed’s 2% annual rate target later this year or next year.
In other news, JPMorgan and Goldman Sachs economists believe that recent strong retail sales and better-than-expected inflation data may convince the Fed to hike rates as early as May. Hawkish comments from Fed Chairwoman Janet Yellen on Wednesday put the possibility of a rate increase in March back on the table and Wednesday’s upbeat retail sales report and strong inflation data increased chances even higher, according to the analysts.
Coming back to current mortgage rates, this week has been terrible for mortgage interest rates, as they have worsened every single day so far. Therefore, borrowers who are in the process of getting a mortgage may better act sooner rather than later, as there’s little to gain floating.