Mortgage rates battled back from recent highs and headed noticeably lower on Wednesday, as treasuries rallied, following the Federal Reserve’s rate hike announcement. As expected, the Federal Open Market Committee (FOMC) raised its benchmark interest rate by a quarter percentage point to a range of 0.75% to 1% on Wednesday. Citing economic progress, a strengthening labor market and increasing inflation the Fed hiked rates for the third time in eleven years.
Financial markets already priced in a high probability of a March rate hike, so the Fed’s decison to raise rates didn’t surprise anyone. Some investors had been concerned, that a more aggressive tightening policy could be on the cards, but the Fed stuck to its outlook and penciled in two more rate increases for 2017 and three hikes in 2018. The bond market reacted positively to the news, causing yields to fall.
As treasuries and mortgage-backed securities (MBS) rallied, mortgage interest rates improved. Several lenders passed along the gains, and those who haven’t yet, are expected to do so this morning. Current mortgage rates are noticeably lower compared to those before the Fed announcement. On average, lenders are offering 30-year fixed conventional loans at a rate of 4.25%, an improvement of 0.125% since Wednesday morning.
As mentioned above, treasuries posted big gains during Wednesday’s trading session. The top-rated 10-year treasury yield, which is one of the best market indicators of where mortgage rates are heading, retreated from a multiyear high, falling 9 basis points to 2.51%. When the 10-year treasury yield falls, mortgage rates are often trending lower as well. This is the reason why current mortgage rates are lower compared to rates from Wednesday. The longer-dated 30-year treasury yield finished the trading day at 3.11%, a decline of 6 basis points.
MBS pricing is in the red on Thursday morning, following the release of some better-than-expected economic data (more on that later). If MBS pricing remains in negative territory, mortgage interest rates may lose some ground today.
Three pieces of domestic economic data got released this Thursday. According to the Commerce Department’s report, following a 2.6% decline in the first month of the year, housing starts jumped 3% to a seasonally adjusted annual rate of 1.29 million units in February, This figure marks a four-month high and is above the consensus exepctation. On the other hand, building permits, which is an indicator of housing demand, fell 6.2% to a seasonally adjusted annual rate of 1.21 million last month. a worse reading compared with economists’ expectations.
Today’s economic headlines also include fresh data on jobless claims. The number of Americans filing for unemployment benefits decreased by 2,000 to a seasonally adjusted 241,000 in the week ended March 11, the Labor Department said. The consensus expectation was for a reading of 240,000. Jobless claims are below the 300,000 threshold for 106th consecutive weeks now, the longest stretch since 1970, which indicates a fairly robust, healthy labor market.
Manufacturing conditions in the Philadelphia region pulled back in March, falling to 32.8 from 43.3 a month earlier, which was the highest reading since 1984. This marks the eighth straight positive reading, indicating that business activity in the manufacturing sector remains strong.
Current mortgage interest rates are higher nationwide, according to Freddie Mac’s weekly Primary Mortgage Market Survey (PMMS) released Thursday. The federal agency’s latest data revealed, that the average rate on the 30-year fixed mortgage inched up 9 basis points to 4.30% in the week ended March 16. Shorter-term, 15-year fixed mortgages averaged a rate of 3.50% this week, up 8 basis points compared to last week’s data. On average, lenders were offering the 5-year ARM at a rate of 3.28% this week, which translates to an uptick of 5 basis points. It’s important to note that the housing giant’s survey collects responses from lenders in the early part of each week, therefore it doesn’t take into account those economic headlines and events that happen later on during the week, that has the potential to impact mortgage rate movement.
Financial company Zillow also disclosed its latest mortgage rates this week. According to the latest findings, the standard 30-year fixed mortgage increased to 4.10% on Zillow Mortgages during the wraparound week ended Tuesday. This marks a 13 basis points surge over the previous rate from a week earlier. On the other hand, the 15-year fixed mortgage averaged a rate of 3.26%, while the 5/1 ARM came out at 3.07% during the said period.
A regional breakdown of current mortgage interest rates shows that in California, the 30-year fixed mortgage is carrying a rate of 4.09%, a 12 basis poins jump compared to data in the prior week. The biggest weekly increase in 30-year fixed mortgage rates took place in Pennsylvania, according to Zillow. In Pennsylvania, the interest rate on the 30-year FRM shot up 16 basis points to 4.11% in the wraparound week ended Tuesday. The company’s data also showed, that the lowest mortgage rate on the 30-year fixed conventional loan was measured in Massachusetts during this period, with the average rate coming out at 4.07%.