Mortgage rates caught a break on Thursday, as bond prices bounced back from a massive selloff in the last three trading session, that shifted yields to their highest levels of 2015. Demand for bonds increased today, as investors finally stepped back into the market. The yield on the benchmark 10-year treasury note dropped to 2.309% on Thursday, compared to yesterday’s 2.366%. While in normal circumstances today’s gains in the bond market would be a welcome news for mortgage rates, lenders remained cautious revising their rate sheets. Even that mortgage-backed securities (MBS), which help lenders determining interest rates, improved significantly today, lenders haven’t passed along all the gains. For the most part, today’s improvements can be seen in the form of lower closing costs.
The fact, that the majority of lenders’ rate sheets don’t reflect a healthy drop in mortgage rates this Thursday is not surprising, as they are more hesitant to revise things ahead of the release of a signficiant data, like the May Non-Farm Payrolls report, which is due on Friday. The upcoming jobs data is usually one of the most influential economic reports of the month. Investors are now looking forward to May’s NFP figures for further clues on the strength of the labor market. The NFP data is also a key indicator for the Fed to determine the timing of the impending rate hike.
Speaking of rate hike, not all U.S. central bank officials are sold on the idea of a lift in short-term interest rates this year. Last week, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, who is one of the more dovish members of the Fed, said that lifting short-term interest rates in 2015 would be a mistake. And he is not the only one who shares this opinion. Back in May, another Fed official, Charles Evans said in Stockholm, that the U.S. central bank should refrain from raising interest rates until early 2016.
Earlier today, the IMF said that the Fed should hold off on its planned interest rate hike until early 2016. The organization issued a warning to the U.S. central bank, not to lift short-term interest rates until the economy gets back on track and inflation target levels are met.
Today’s domestic economic calendar included the latest weekly jobless claims data. According to the Labor Department’s figures, less Americans filed for unemployment benefits last week, as initial jobless claims declined 8,000 to a seasonally adjusted 276,000. Overall, this is in line with the consensus expectation. The number of initial jobless claims for unemployment benefits is now under 300,000 for the 13th consecutive week. This is a positive report, that signals a strengthening job market.
In other news, government-sponsored organization, Freddie Mac published its weekly mortgage survey on Thursday, which showed that national mortgage rates remained near 2015 highs this week. According to the federal agency’s latest data, the average interest rate on the 30-year fixed mortgage stayed firm at 3.87% in the week ending June 4, 2015. The same time last year, this type of loan averaged a rate of 4.14%. On the other hand, the national average rate on the 15-year FRM ticked down to 3.08% this week, compared to 3.11% in the prior week. A year ago at this time, the aforementioned fixed mortgage loan was hovering at 3.23%, according to the mortgage-buyer.
Another company, Bankrate, released its national mortgage survey earlier today, which saw the interest rate on the 30-year fixed loan peaking at 4.03% this week, an uptick of 3 basis points compared to data from a week earlier. The survey also showed, that the interest rate on the 15-year fixed mortgage set a new high in 2015, in the form of 3.26%. With regards to the 5/1 adjustable rate mortgage, it inched higher to 3.18% from the previous 3.17% it held a week earlier.
Extreme market volatility, which seems like the new normal these days, has been a major factor in the last few weeks that affects mortgage rates. Tomorrow’s job data, whether the outcome is strong or weak, has the potential to shake up markets big time and put a pressure on mortgage rates. If you believe that pricing on bonds will rebound and eventually mortgage rates will consolidate or even decrease, then you should float ahead and see what happens after the release of the upcoming NFP data. On the other hand, if you are averse to risk and believe that mortgage rates will continue their upward trend in the coming days, then you better lock your rate sooner rather than later.
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