Mortgage rates headed slightly lower on Tuesday, as the bond market strengthened, effectively erasing the marginal damage from a day earlier. Current mortgage rates are pretty much in line with those in the beginning of the week, with the improvements being so negligible that most lenders haven’t passed along the recent gains. The changes might effect lender credit instead of actual rates. With that said, the absence of major economic news and market-moving headlines is a good thing for mortgage interest rates, as they remain close to the lowest levels in 8 months. The average lender is currently offering 30-year fixed conventional loans at a rate of 4.000%, with some of the more aggressive lenders down to 3.875%, according to the latest market information.
In the secondary market, U.S. treasury prices bounced back on Tuesday. The top-rated 10-year treasury note, which is one of the most widely followed market indicators in the global economy, finished the trading day at a yield of 2.16%, down 3 basis points compared to Monday’s data. Normally, when the 10-year treasury yield slides, mortgage rates tend to follow suit. Although, the bond market posted some small gains yesterday, it doesn’t reflect current mortgage rates, as the majority of lenders were reluctant to pass along the improvements. Coming back to treasury bonds, the long-dated 30-year note closed Tuesday’s trading session at a yield of 2.75%, which marks a 4 basis points decline since Monday.
Mortgage-backed securities (MBS), which have a strong correlation with mortgage rates, are in a good shape this Wednesday morning, ahead of the release of the NAR’s existing home sales report for May. A weak housing market data could prompt investors and traders to flock into safe haven assets, such as MBS, which could eventually send today’s mortgage rates lower. On the other hand, a strong housing market report may cause weakness in the bond market and that could possibly put an upward pressure on rates. According to the most recent forecasts, sales of previously-owned homes likely fell 0.7% to a seasonally adjusted 5.5 millon units in May. Back in April, the NAR reported that existing home sales dropped 2.3% to a seasonally adjusted annual rate of 5.57 million units.
This is a pretty slow week in terms of significant economic data. On the other hand, we are getting a whole lot of Fedspeak. Back on Monday, New York Fed President William Dudley made some hawkish comments at a business roundtable conference in Plattsburg, NY, bolstering expectations among market participants, that the U.S. central bank will stick to its rate-hike plan, despite the recent patch of soft economic data. Dudley claimed that he is confident inflation will rebound alongside wages, which could allow the Fed to hike rates sooner. As of Wednesday, traders see a 40% chance of a quarter point interest rate hike before the year-end, according to the closely-watched CME FedWatch tool.
Another top central banker who made public appearance in the beginning of the week was Chicago Fed chief Charles Evans. Speaking to the Money Marketeers of New York University on Monday, Evans said that the „current environment supports very gradual hikes”. He added, that he is increasingly concerned about the recent softness in inflation. Evans went on to say, that it could be worthwhile for the Fed to wait until the end of the year to assess the next rate increase.
The Fed needs to be careful about hiking rates going forward, Dallas Fed President Robert Kaplan said on Wednesday at the Commonwealth Club in California. Kaplan stated, that he wants to wait for more data to understand whether the recent decline in inflation figures is indeed temporary. Kaplan added, that he is keeping an „open mind” on the amount of rate hikes this year.
In a speech at an event in Amsterdam on Tuesday, another top U.S. policymaker, Boston Fed chief Eric Rosengren expressed his concerns, that the era of low interest rates poses financial stability risks and that could limit the central bank’s ability to deal with negative shocks.
Coming back to current mortgage interest rates, financial company Zillow reported on Tuesday, that the average interest rate on the 30-year fixed mortgage was on a downward trajectory during the wraparound week ended yesterday. The 30-year fixed rate home loan ended the week at 3.68%, a decrease of 3 basis points compared to data from the prior week. According to Zillow, the 15-year fixed mortgage settled at a rate of 2.96%, while the 5/1 ARM was offered at a rate of 2.94% in the wraparound week ended Tuesday on Zillow Mortgages.
A regional breakdown of current average mortgage rates shows, that the biggest weekly improvement took place in California, where the 30-year FRM was coming out at a rate of 3.67% as of Tuesday, down 5 basis points compared to data from a week earlier. The company’s data also showed that the lowest mortgage rate on the 30-year fixed conventional loan was measured in Texas during the wraparound week, with the average rate coming out at 3.65%. On the other hand, the highest average rate for this type of long-term mortgage loan was measured in New York state (3.80%).
Mortgage rates continue to hover near 2017 lows. All things considered, there’s definitely a great opportunity to some borrowers to save on monthly payments with refinancing an existing mortgage, or buying a new or used home with locking in an ultra-low rate.