Mortgage rates drifted slightly lower late last week, while U.S. treasury bonds strengthened, as buyers stepped in and flocked into ultra-safe haven assets. In the beginning of last week mortgage interest rates increased significantly, soaring to such high levels we haven’t seen since July, as a result of weakness in the bond market. However, later on in the week interest rates managed to recover some of the losses. With that said, the average lender is now offering the 30-year mortgage rate in the range of 4.125% – 4.250%, which is higher than the previous 4.000% – 4.125%, which was the most prevalently quoted rate for the 30-year FRM a week earlier. Typically, the last two weeks of the year see lower trading volumes in financial markets, which can lead to price swings, increased volatility and possible changes in mortgage rates. Nevertheless, the month-end/year-end is usually supportive for mortgage interest rates and lenders tend to be conservative with adjusting their rate sheets at this time of the year.
With regards to U.S. treasury bonds, the 10-year note finished Thursday’s trading session at a yield of 2.25%, down 2 basis points compare to data from a day earlier. On the other hand, the yield on the long-term 30-year treasury bond came in at 2.96%, an downtick of 4 basis points, according to the latest 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 changes in interest rates at some lenders this Monday. However, the changes would be rather marginal in most cases and they would affect closings costs as opposed to contract rates.
30-year and 15-year mortgage rates remained largely unchanged nationwide last week, according to Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday. The mortgage giant’s data showed, that the average interest rate on the 30-year fixed conventional mortgage inched down 1 basis point to 3.96% from 3.97% in the prior week. The same time a year earlier, the 30-year fixed mortgage averaged a rate of 3.8%. Similarly, the average rate on the 15-year fixed mortgage hasn’t seen major changes last week. Currently, this type of loan is hovering at a rate of 3.22%, just like a week earlier. Back in 2014, the 15-year FRM averaged a rate of 3.1%.
On the other hand, hybrid adjustable rate mortgages nudged higher during the holiday-shortened week. The average rate on the 5-year adjustable rate mortgage increased to 3.06% last week, an uptick of 3 basis points. A year ago, this type of flexible mortgage loan stood at a rate of 3.01%. The interest rate on the 1-year ARM moved higher as well last week, the federal agency’s data showed. This type of mortgage is currently hovering at a rate of 2.68% nationwide. The same time a year ago, the 1-year ARM averaged a rate of 2.39%.
The past week’s economic calendar was rather quiet and the week ahead also looks particularly light on influential economic data. Nonetheless, we will get some fresh housing market and manufacturing data during the upcoming week. The Dallas Fed Manufacturing Survey for December is set to be released later this Monday. According to the latest estimations, manufacturing activity in the Dallas region likely declined to -7.0 in December from -4.9 last month.
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 the S&P/Case-Shiller Home Price Index. Analysts expect an increase of 0.55% in home prices in October, or 5.60% year-over-year.
The Conference Board’s Consumer Confidence Index for December is another upcoming report scheduled for release on Tuesday. The latest forecasts suggest that the index likely rebounded in December, following a decline a month earlier.
Next up is pending home sales for November. According to sales data from the National Association of Realtors, contracts to buy previously owned U.S. homes edged up 0.2% to 107.7 in October, indicating a modest rebound in the real estate market, but missing forecasts of a 1% increase month-over-month. Economists now expect a modest 0.6% increase for November’s pending home sales data.
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 projections, initial claims for unemployment benefits likely increased by 6,000 to 273,000 from a week ago.
The Chicago Purchasing Managers Index for December is set to be released on Thursday. Back in November, the index remained in negative territory at 48.7%, suggesting contraction in the manufacturing sector in the Midwest. Analysts believe that manufacturing activity likely picked up in the region this month and they expect a neutral reading of 50 for December’s Chicago PMI.
So far mortgage rates have managed to avoid moving significantly higher, following the Federal Reserve’s decision to increase short-term rates. Mortgage interest rates are still at historic lows, which means borrowers can take advantage of current low mortgage rates to buy a new home or refinance an existing loan. While we don’t anticipate a huge spike in mortgage rates in the next few weeks, we advise borrowers to take advantage of low interest rates sooner rather than later.
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