Mortgage rates moved slightly higher in the beginning of the week, despite an improvement in the bond market and the impact of some sub-par domestic economic data. Buyers stepped in and flocked into the ultra-safe fixed-income securities yesterday, following a bond sell-off late last week. As a result pricing on treasury bonds increased and at the same time yields dropped. Although, in normal circumstances when the bond market improves mortgage rates usually drop, this wasn’t the case on Monday and the reason behind is simply high market volatility
While current borrowing costs are slightly higher compared to those on Friday, at many lenders the changes can be seen in the form of higher closing costs or lower lender credit, instead of adjustments in interest rates. According to our observations, the average lender is offering the 30-year fixed mortgage rate in the range of 3.75% – 3.875% these days. Current mortgage rates are still close to 5-month lows, which is good news for those looking to buy a new or used home or planning to refinance their existing loans, as mortgage borrowing costs remain low.
In recent trading, the yield on the benchmark 10-year treasury note slipped 2 basis points to 2.07%. On the other hand, the longer-term 30-year treasury yield closed the trading session at 2.87%, a decrease of 3 basis points.
On Tuesday morning, mortgage-backed securities (MBS), which tend to dictate the direction of mortgage interest rates, are rallying, and this could be in connection with some rather tepid domestic economic reports that saw the light of day. Still, we don’t anticipate a big net change in mortgage rates today, as the market is awaiting the outcome of the Federal Reserve’s policy meeting.
Now, heading over to today’s economic calendar, a good chunk of fresh data came out this Tuesday in the form of Durable Goods Orders report, S&P/Case-Shiller Home Price Index, Consumer Confidence report and the Richmond Fed Manufacturing Index.
The Commerce Department released its durable goods orders report for September this Tuesday, which showed that orders for long-lasting goods such as aircraft fell a seasonally adjusted 1.2%, following an even steeper 3% decrease in August. The consensus expectation was for a reading of a 1.0% decline. When transportation orders taken out of the equation, orders fell 0.4% month-over-month in September, missing expectations of a 0.1% decrease. This is a disappointing report, that spports a surge in bond prices this morning.
U.S. home price growth continued to increase in August, according to the latest S&P/Case-Shiller Home Price Index released earlier today. The home price index rose 4.7% nationwide year-over-year in August, which is slightly higher than the 4.6% increase in July. As far as the 10-city index is concerned, it soared 4.7% from a year earlier, following a 4.5% uptick in July. The 20-city index was up 5.1% year-over-year in August, which is a faster pace of growth compared to the increase of 4.9% the month before. The report signals that the housing market continues to gain momentum, as we are heading into the final months of 2015.
Manufacturing activity in the Atlantic region rose to -1 in October from -5 in September, according to the latest Richmond Fed Manufacturing Index released on Tuesday. This reading is better than the projected -3.5 figure, but still remains in contraction territory, as any reading below zero suggest contraction.
The Conference Board’s Consumer Confidence Index for October came out at 97.6, missing forecasts of 103. Back in September, consumer confidence was at 102.6. Americans were less optimistic about the economy’s short-term outlook this month and were less upbeat about conditions in the job market as well, claiming that the number of job vacancies have decreased and those jobs are hard to get.
These are certainly not the type of data that would encourage to Fed to go ahead and tighten monetary policy at the October FOMC meeting. Domestic economic data has been tepid at best in the last few weeks. Still, there’s always a risk for current mortgage rates that the central bank raises short-term rates unexpectedly. And that could catch the market flat-footed, as the presumption of a rate hike is clearly not priced into bonds at this point.
According to the CME FedWatch, which is a tool used by investors and traders to predict future monetary policy, there’s a 34% chance of a rate liftoff in December. Now, if the Fed intends to tighten monetary policy this year, they should give some clear signals to the market. And whenever they decide to do this, mortgage rates are expected to rise.
Today’s mortgage rates at top U.S. lenders show little movements compared those rate levels from Monday. At Chase (NYSE:JPM) the 30-year fixed mortgage rate for home refinancing is available today at a rate of 3.875%. The same type of refinance mortgage loan with a 15-year term is quoted at 3.125%. Switching to flexible mortgage loan alternatives, the 7/1 adjustable rate mortgage is currently offered at a rate of 3.000%. Those looking to secure the 5/1 ARM can expect to pay 3.000% interest cost.
At another major mortgage lender, Wells Fargo (NYSE:WFC), the 30-year home refinance mortgage rate is coming out at 4.000% on Tuesday. Borrowers preferring to obtain the 15-year fixed refinance mortgage, will see this type of loan carrying 3.250% interest cost. Among non-conventional loan options borrowers can find the 30-year FHA-insured refinance loan, which is up for grabs at a rate of 3.750%, according to the latest mortgage information.
The above mentioned interest rates are subject to change and are not guaranteed. In order to search for live mortgage rate quotes from some of the top U.S. lenders, please click on the link below.