Mortgage rates barely budged on Friday, as government bond prices retained their levels from a day earlier, amid expectations that the Federal Reserve will hold off on raising short-term rates until early 2016. U.S. stocks closed the past week at higher levels, as Friday’s mixed domestic economic data further eroded expectations that the central bank would raise rates this year. It was a fairly uneventful day for the bond market, which also means that mortgage interest rates remained largely unchanged compared to rate levels seen on Thursday. The average lender is now quoting the benchmark 30-year fixed mortgage rate in the range of 3.75% – 3.875%, as we are heading to the new week.
So current mortgage rates have been close to 5-month lows in the last few weeks, and with the market expecting a delayed rate hike to take place sometime in early 2016, mortgage rates could possibly enjoy some more time near historical lows. And this gives yet another golden opportunity for borrowers sitting on the fence to buy a new or used home or refinance an existing mortgage at record low interest rates.
In the secondary market, the 10-year treasury note finished Friday’s trading session at a yield of 2.04%, unchanged compared to Thursday’s level. In a weekly comparison, the 10-year treasury yield ticked down 2 basis points last week. The 30-year treasury yield was also flat during the trading day, as it closed at 2.87%. Overall, the 30-year treasury yield declined 2 basis points during the past week.
National mortgage rates increased slightly last week, according to McLean, VA-based government-sponsored enterprise, Freddie Mac’s latest weekly Primary Mortgage Market Survey (PMMS) released Thursday. The mortgage-buyer’s survey showed, that the average interest rate on the 30-year fixed mortgage shot up to 3.82%, which translates to a 6 basis points uptick compared to data from a week earlier. 15-year fixed mortgage rates drifted higher 4 basis points to 3.03% last week, the federal agency’s findings revealed. On the other hand, average rates on flexible type of mortgage loans were mixed in the week ended October 15. The 5-year treasury-indexed hybrid adjustable-rate mortgage averaged a rate of 2.88%, unchanged compared to data in the prior week. The national average rate on the 1-year ARM inched down to 2.54% last week, a 1 basis point improvement from a week earlier, according to Freddie Mac.
A regional breakdown of the latest national mortgage rates shows, that the lowest average rate on the 30-year fixed mortgage was measured in the Western region, where it came out at 3.76%. Freddie Mac’s PMMS survey also revealed that the highest average rate on the 30-year FRM was measured in the Northeast and Southeast regions of the country. The highest national mortgage rate on the 30-year fixed loan was 3.87% in the aforementioned regions last week.
As per the latest CME FedWatch update, the market now sees a 5% chance for a liftoff in short-term rates at the U.S. central bank’s upcoming policy meeting in October. Investors and traders are pricing in only a 30% probability of a rate hike to take place at December’s FOMC meeting. Market participans are now banking on the Fed raising rates in March 2016, with a 52% chance, according to the CME FedWatch.
Now, moving on to the upcoming week’s economic calendar, it will be packed with a slew of housing market data, including fresh reports on homebuilder sentiment, housing starts, building permits and existing home sales. On Monday, the National Association of Homebuilders will publish its latest monthly housing market data. The consensus expectation is a reading of 62 for October’s housing market index.
Tuesday will see the release of September’s housing starts data and economists believe the pace of residential starts increased 1.9% to a seasonally adjusted 1.147 million units in September. Building permits, a proxy for future construction, likely fell 0.4% to 1.165 million units in September, according to the latest projections.
The National Association of Realtors will release September’s existing home sales report on Thursday. Existing home sales for September likely climbed 1.1% to 5.37 million units, analysts say. Back in August, existing home sales tumbled 4.8% to a seasonally adjusted annual rate of 5.31 million units.
We will also get new data on jobless claims in the week ahead, as the Labor Department reports its latest findings on the health of the labor market each Thursday. According to economists, the upcoming reading on jobless claims will likely show 265,000 initial claims for unemployment benefits.
Besides the above mentioned housing market data, a few regional manufacturing reports are scheduled for release in the week ahead. The Kansas City Fed’s manufacturing composite index for October will see the light of day on Thursday. Economists believe that manufacturing activity in the Kansas region likely declined to -9 in October from -8 in September.
On Friday, Markit Economics will release its Manufacturing PMI for October. Analysts believe that the rate of expansion in the U.S. manufacturing sector likely slowed down to 52.9 this month from 53.1 in September.
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