Mortgage rates tumbled for the fourth straight day on Thursday, ahead of the upcoming Non-Farm Payrolls report, which is the most influential domestic economic data each month. Pricing on U.S. government bonds improved on Thursday, while yields fell. Interest rates are now close to such levels we haven’t seen since late spring. Mortgage lenders have been updating their rate sheets with lower mortgage rates throughout the week, and if you compare current mortgage rates to those from late last week, you can observe some noticeable improvements. Several lenders now offering 30-year fixed conventional mortgage rates in the range of 3.75% – 3.875% these days, and rates are slowly approaching 3.625%. Late last week, most lenders was quoting 30-year fixed mortgage rates at 3.875% – 4.000%.
The 10-year treasury note closed yesterday’s trading day at a yield of 2.05%, which translates to a 1 basis point improvement over Wednesday’s data. As mortgage rates tend to follow the movement of the 10-year treasury note, chances that now you can see lower mortgage interest rates at your lender. With regards to the 30-year treasury note, the yield on this type of government debt security fell to 2.85% on Thursday.
This Friday morning mortgage-backed securities (MBS), which lenders use to determine daily interest rates, are in the green now, following a weaker-than-expected Non-Farm Payrolls data (more on that report later). The yield on the 10-year treasury note has dropped below 2% as of this writing. At the same time equities are falling. The bottom line is that current mortgage rates are now hovering near 6-month lows.
So the month’s most influential economic report, September’s NFP data came out today, missing forecasts big time, showing that the economy added 142,000 jobs last month versus the consensus expectation of 203,000 jobs. Also, August’s numbers were revised down from the initially reported 173,000 to 136,000 jobs. This is a weak report that raises questions about the health of the labor market and could cool expectations that the Federal Reserve will raise short-term interest rates later this year. Also, the disappointing NFP data does little to improve investor confidence in financial markets.
The Labor Department also reported that unemployment rate held steady at 5.1% in September, which is the lowest level since 2008. On the other hand, average wages declined slightly, after two months of growth, which my add further concerns to the Fed, when it comes to interest rate policy decison.
Following the release of the disappointing jobs report, now many analysts believe that Fed will hold off on raising rates until early next year. The Fed Fund Futures plunged after the release of the latest NFP data. While earlier this week, the market saw a 42% chance for a rate hike in December, as per the Fed Funds Futures, following the release of the NFP report, the probability of a December rate hike dipped to 27%. The market now sees a 51% chance for a rate hike in March 2016. Almost all the Fedspeak from this week pointed to a rate hike in late 2015, but now some of Fed members may want to rethink their standpoints, as the latest batch of domestic economic reports were rather tepid.
Another domestic economic data that saw the light of day on Friday, was August’s Factory Orders report. The Commerce Department reported on Thursday, that factory orders declined 1.7% versus the expectation of a 1.3% decrease. The current slide marks the biggest setback since December, when factory orders dropped 3.7%.
As far as current mortgage interest rates are concerned, government-sponsored agency Freddie Mac published its latest weekly Primary Mortgage Market Survey (PMMS) report on Thursday, which revealed that the average 30-year fixed mortgage rate improved to 3.85% in the week ended October 1, 2015. Freddie Mac’s findings also showed, that the national average mortgage rate declined on the 15-year fixed mortgage, and it’s now hovering at 3.07%. A week earlier this type of mortgage loan was carrying an average rate of 3.08%.
However, we should note, that Freddie Mac’s weekly survey collects responses from lenders earlier in the week and doesn’t reflect the market movements that happen later on in the week. For instance, the latest Primary Mortgage Market Survey doesn’t take into account this Friday’s disappointing NFP jobs report. And as we now, the weaker-than-expected jobs report eventually led to a sharp drop in mortgage rates.
A seperate mortgage survey from Bankrate released Thursday showed a bit different results than Freddie Mac’s PMMS data. According to Bankrate’s findings, the average interest rate on the 30-year fixed mortgage increased slightly this week and now it stands at 4.01%. As far as 15-year fixed conventional loans are concerned, the average rate remained unchanged at 3.18%. Bankrate’s national weekly mortgage survey also revealed, that the average interest rate on the 5/1 adjustable rate mortgage stayed intact at 3.19%.
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