Mortgage rates improved on Friday, as the bond market rallied following the release of the big January NFP report. Although, the headline job growth reading was better-than-expected, as 227,000 private sector jobs were added last month versus the forecast of 175,000 jobs, but average hourly earnings increased by a sluggish 0.1%, a weak figure, which eventually gave bonds a decent boost on Friday morning. While mortgage interest rates edged lower on Friday, the most prevalently quoted rate on the 30-year fixed mortgage remains at 4.250%, with noticeable changes could be seen only in upfront costs in most cases, according to the latest data.
U.S. government bonds strengthened on Friday, erasing a bigger initial rally in the morning, as comments from top Fed officials suggested, that raising rates at the next FOMC meeting in March could be on the table. Treasury yields were slightly higher across the board, with the benchmark 10-year treasury note finishing the day at a yield of 2.49%, which marks a 1 basis point increase compared to Thursday’s data. With regards to the longer-term, 30-year treasury yield, it closed the trading session at 3.11%, up 2 basis points from a day earlier.
Current mortgage rates are steady nationwide, Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday showed. On average, lenders across the country were offering the 30-year fixed mortgage at a rate of 4.19% in the week ended February 2, the same rate as a week earlier. At this time a year ago, the 30-year FRM was carrying a rate of 3.72%. The average interest rate on the 15-year fixed mortgage was up 1 basis point at 3.41% last week, according to Freddie Mac’s survey. The same time a year ago, the 15-year fixed loan averaged a rate of 3.01%. The federal agency’s latest data also revealed, that the 5-year ARM averaged a rate of 3.23% in the past week, an increase of 3 basis points compared to data in the prior week. A year ago at this time, the 5-year ARM was hovering at 2.85%.
In terms of influential domestic economic data, the Labor Department released January’s Employment Situation report on Friday, which is one of the biggest market moving events each month. The headline job growth figure of the NFP report exceeded expectations, as non-farm payrolls rose to a seasonally adjusted 227,000 in January, from 157,000 in the preceding month. The consensus expectation was for a reading of 175,000 jobs. The significant gain in non-farm payrolls was not a big surprise, following the release of a strong ADP Employment report on Wednesday. However, a shortfall in average hourly earnings, which is an indicator of wage growth, is a negative surprise. Moreover, the unemployment rate edged up to 4.8% from 4.7% a month earlier.
Some Fed officials made public appearances on Friday and their shared their views on U.S. monetary policy. San Francisco Fed President John Williams said in an interview on Bloomberg TV, that the U.S. central bank shouldn’t be „too timid” or „delay too long” lifting rates. Williams added that, three rate hikes in 2017 is a reasonable guess. Currently, the market is pricing in a 9% odds of a rate increase to take place at the next Fed meeting in March, according to the CME Group FedWatch tool, which is used by investors and traders to predict future monetary policy.
Another top U.S. policymaker, Chicago Fed President Charles Evans said at the Prairie State College Economic Breakfast on Friday, that the Fed should raise rates at a slow pace. The Chicago Fed chief also added, that he could be comfortable with three rate increases this year. Evans, who is viewed as one of the more dovish policymakers of the central bank, believes the economy could grow at a 2-2,5% percent annual pace in the next few years.
Overall, current mortgage rates are lower than those seen a week earlier. However, long terms trends are favoring higher mortgage rates. With that said, borrowers who are looking to lock a solid rate would be better off acting sooner rather than later.