Current Mortgage Rates Roundup for January 18, 2017

Mortgage rates bounced back on Tuesday, essentially erasing the losses from last Friday. U.S. treasury bonds rallied yesterday, as investors and traders flocked into safe-haven instruments, after they returned from the holiday weekend. As a result, yields declined on several short-term and long-term government bonds on Tuesday. While the most prevalently quoted interest rate on 30-year fixed mortgages curently remains at 4.125%, closing costs could be lower at several mortgage lenders.

In the secondary market, the 10-year treasury note, which is a bedrock of global finance, finished yesterday’s trading session at a yield of 2.33%, down 7 basis points since Friday. As mortgage rates tend to follow in the footsteps of the 10-year treasury note, chances you may see lower mortgage rates or lower closing costs at your favorite lender this Wednesday. In general, when the yield on the 10-year treasury note declines, mortgage rates usually follow suit. On the other hand, if the 10-year treasury yield rises, interest rates tend to go up as well. With regards to the 30-year treasury note, the yield on this type of government bond closed Tuesday’s trading day at 2.93%, a decrease of 6 basis points compared to Friday’s data.

This Wednesday morning, mortgage-backed securities (MBS), that typically set the tone for mortgage rates, are slightly in the red. If pricing on MBS stays on its current track, we may see some higher mortgage rates at the end of the day.

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As we mentioned back on Monday, several important domestic economic data is scheduled for release this week. Earlier this Wednesday, the Labor Department released a fresh report on its headine inflation gauge. The U.S. consumer price index (CPI) increased 0.3% in December and 2.1% year-over-year, according to the Labor Department’s data. As far as core inflation is concerned, which strips out volatile food and energy categories, it rose 0.2% over the prior month and 2.2% on a year-over-year basis. The current figures are in line with economists’ expectations.

U.S. industrial production grew at the fastest pace in two years in December, the Federal Reserve reported on Wednesday. Industrial output advanced 0.8% last, the biggest increase since November 2014. The consensus expectation was for a reading of 0.9% for last month’s industrial production output.

On Tuesday, several top Fed officials delivered remarks on monetary policy. New York Fed President William Dudley said yesterday at a retailing industry conference, that „the risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem”. In other words, Dudley doesn’t expect the Fed to hike rates more rapidly than they would like.

San Francisco Fed President John Williams also shared his views on monetary policy on Tuesday, calling for further gradual rate increases over the next few years in order to keep the economy on a sustainable course.

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According to Fed governor, Lael Brainard, if the Trump administration’s fiscal policy aims at boosting short-term growth, that could fuel inflation, which may force the U.S. central bank to raise rates at a faster pace. „If fiscal policy changes lead to a more rapid elimination of slack, policy adjustment would, all else being equal, likely be more rapid,” Brainard said in prepared remarks at an event on Tuesday.

Earlier this Wednesday, the National Association of Home Builders released its latest homebuilder sentiment index for January. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) dropped 2 points to 67 in January, signaling that homebuilder confidence remains high. Economists had forecast a reading of 69. December’s figure was revised down by 1 point. A reading above 50 indicates expansion in the sector.

In other news, the Mortgage Bankers Association (MBA) reported this mid-week, that total mortgage applications volume rose 0.8% with seasonal adjustments taken into account in the week ended January 13. The Washington-based group’s survey showed, that the slight uptick in loan applications volume was driven by refinancing. The MBA’s Refinance Index surged to 7% from a week earlier. The refinance share of total mortgage activity increased to 53% from the previous 51.2%, the MBA’s survey revealed. As far as home loan applications are concerned, the seasonally adjusted Purchase Index declined 5% week-over-week.

The FHA share of total mortgage applications edged up to 13.1% from 11.7% in the prior week, a notable jump. At the same time the share of VA mortgage applications dipped to 12.1% from the previous 12.8% a week earlier. As for USDA loan applications, the share of these type of loans remained unchanged at 0.9% last week.

According to the MBA’s survey, the average contract interest rate for 30-year fixed mortgages with conforming loan balances nudged lower to 4.27% from 4.32%. The average contract interest rate for 30-year FRMs with jumbo loan balances inched down 5 basis points to 4.22% in the said period. According to the group’s data, the average contract interest rate on 30-year fixed mortgage loans backed by the FHA drifted higher to 4.10% from the previous 4.08% in the prior week.

Overall, current mortgage rates are lower compared to rates from last month. Ultimately, the decision to lock a rate or float depends on your risk tolerance. If you are risk-averse, you may better lock a rate sooner rather than later. On the other hand, if you are willing to gamble for a big reward, then you want to float and see what happens to mortgage rates in the next few weeks.