Mortgage rates remained nearly unchanged on Friday, as financial markets stayed in a wait-and-see mode ahead of the Federal Reserve’s upcoming policy meeting, which is set to kick off next week. Pricing on mortgage-backed securities (MBS), which lenders use to determine their rate sheets, improved slightly today, which could be seen in lower closing costs at selected lenders. Right now, mortgage interest rates have been bouncing around in a tight range, and we anticipate to see more of the same in the coming days, as markets are looking forward to the Fed’s policy announcement next week. Yields on government bonds fell today, following the release of some mixed economic data, which drove investors to ultra-safe haven assets, such as treasury bonds. This comes on the heels of a bond market selloff on Thursday, where the yield on the 10-year treasury note reached a one-month high.
On Friday, the yield on the benchmark 10-year treasury note ticked down by 3 basis points, and closed the trading session at 2.20%. The long-term, 30-year treasury note finished the trading day at a lower yield as well, in the form of 2.95%. A day earlier this type of treasury bond was coming out at 2.98%.
As we mentioned in yesterday’s mortgage report, this week has been particularly light on economic data and most of the reports that come out have little impact on markets . However, today two notable domestic economic reports got released, including fresh data on producer prices and new outlook on consumer sentiment. The Labor Department reported on Friday, that the headline Producer Price Index (PPI) was flat in August, compared to data from the prior month. The Core PPI, which excludes volatile food and energy categories, increased 0.3% last month, according to the latest data. The current reading is slightly above economists’ expectations.
On the other hand, the University of Michigan’s latest monthly survey revealed that consumer sentiment decreased in September, with a reading of 85.7 versus the expectation of 91. This is a disappointing figure, and it’s not something that would support the Fed’s plans of a rate hike in the nearest future.
The Fed’s two-day meeting will begin next Wednesday, which could potentially lead to a landmark shift in monetary policy. While investors and economists are divided whether the U.S. central bank will raise rates at the September policy meeting or not, if the Fed eventually decides to hike, it could likely cause treasury yields to increase, experts believe. And naturally, a tightening of monetary policy could also affect mortgage interest rates.
In a report released back on Thursday, investment banking giant Goldman Sachs stated that the Fed should take a pass on raising short-term rates at its upcoming policy meeting in mid-September, and wait until at least December with the rate hike. According to the investment banking firm’s standpoint, financial conditions may have already tightened the equivalent of three 25 basis points hikes.
In other news, a panel of ex-Fed officials believes, that the U.S. central bank will hold off on raising rates in September, due to deteriorating global economic outlook. Former Fed member, Joseph Gagnon said last week, that the global economic situation has worsened since the Federal Reserve’s last policy meeting in July, stock markets have fallen 5-10% in the meantime, while the dollar has strengthened.
Coming back to mortgage rates, financial firm Zillow reported earlier this week, that the 30-year fixed mortgage rates were on a downward trajectory during the wraparound week ended on Tuesday. According to the latest data from Zillow, the average interest rate on the benchmark 30-year FRM dipped 1 basis point this week to 3.74%, compared to data from a week earlier. The company’s findings also revealed that the interest rate on the 15-year fixed home loan was hovering at 2.90% this week, while the 5/1 ARM was coming out at 2.66%.
Looking at current mortgage rates by state, the biggest weekly improvement took place in Washington state, where the average interest rate on the 30-year conventional mortgage loan headed lower by 2 basis points to 3.71%. The lowest average mortgage rate on the 30-year fixed home loan was measured in Colorado and Washington states in the form of 3.71%, during the wraparound week. On the other hand, the highest average mortgage rate on the 30-year FRM was measured in New York State, where this type of loan was hovering at 3.84%, Zillow’s data showed.
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