Mortgage rates increased sharply on Wednesday, as expectations surged for a rate hike at the upcoming FOMC meeting in March, following hawkish comments from top Fed officals in the last few days. U.S. governmnet bonds sold off quickly during yesterday’s trading session and incoming economic reports weren’t able to stop the selling momentum, as they came in line with expectations. Several mortgage lenders repriced for the worse, and that’s why current mortgage rates are higher compared to those a day earlier. The most prevalently quoted rate on the 30-year fixed mortgage is now back to 4.25%, according to the latest data.
Treasury bonds lost some ground during Wednesday’s trading session. The yield on the top-rated 10-year treasury note spiked to 2.46%, which marks a 10 basis points increase over the previous 2.36% from Tuesday. The bond market is a driving force behind mortgage interest rates and the 10-year note is a key factor when it comes to determining mortgage pricing. Therefore, chances that now you will see higher mortgage rates at your lender compared to rates from the beginning of the week. As far as the long-term, 30-year treasury bond is concerned, the yield jumped 9 basis points to 3.06% on Wednesday.
Looking at the pricing on mortgage-backed securities (MBS) this Thursday morning, it looks like that weakness in the bond market may continue today. MBS has opened in the red, ahead of the release of today’s batch of domestic economic data, including weekly jobless claims.
Mortgage interest rates are on a downward trajectory nationwide, according to Freddie Mac’s latest weekly data released Thursday. The mortgage-buyer’s latest Primary Mortgage Market Survey (PMMS) showed, that the average interest rate on the 30-year fixed mortgage ticked down 6 basis points to 4.10% in the week ended March 2. On average, mortgage lenders were offering shorter-term, 15-year fixed conventional loans at a rate of 3.32% over the course of the week, a decline of 5 basis points compared to data in the prior week. The federal agency’s PMMS survey also showed, that the flexible 5-year ARM was carrying a rate of 3.14% this week, down 2 basis points from a week earlier.
In other mortgage-related news, financial company Zillow reported earlier this week, that the average interest rate on the standard 30-year fixed mortgage eased to 3.85% on Zillow Mortgages during the wraparound week ended Tuesday. This marks a 8 basis points decline over the previous rate from a week earlier. On the other hand, the 15-year fixed mortgage averaged a rate of 3.07%, while the 5/1 ARM came out at 2.83% during the said period.
A quick look at current average mortgage rates by state shows that in California, the 30-year FRM is carrying a rate of 3.85%, an 8 basis poins drop compared to data in the prior week. The biggest weekly decline in 30-year fixed mortgage rates took place in Illinois and Washington states, according to Zillow. In the former state, the 30-year FRM is now coming out at a rate of 3.85%, while in the latter one it stands at 3.86%. The company’s data also revealed 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 3.82%. On the other hand, the highest average rate for this type of long-term mortgage loan was measured in New York state (3.97%).
On Tuesday, a decent bit of domestic economic data got released, however they had limited impact on markets, as they mostly came in line with expectations. Personal nominal income rose 0.4%, while consumer spending grew 0.2% in January, according to the latest data from the Commerce Department. The Core PCE indicator, which is the Fed’s preferred measure for inflation, advanced 1.7% in January. The U.S. central bank is closely watching core PCE inflation, and the latest reading – while still below the Fed’s 2% target – increases the odds of a rate adjustment at the upcoming policy meeting next month.
Manufacturing activity rose to 57.7 in February versus 56 a month earlier, according to the Institute of Supply Management’s latest index. Economists had projected an increase to 56.2 for February’s reading. That’s the best reading since August 2014, one that paints a positive outlook for the manufacturing sector. Any reading above 50 signals expansion, while data below 50 indicates contraction in the industry.
The Fed released its latest Beige Book on Tuesday, which showed that the U.S. economy continued to expand at a modest pace during the period of early January through mid-February. However, the Beige Book revealed that businesses were somewhat less optimistic about their short-term outlook. The report also added, that the labor market tightened in early 2017, with some companies experiencing difficulties finding workers. The Fed Beige Book is usually released two weeks before the Fed meets to discuss its future interest rate policy.
Only one piece of meaningful economic data was scheduled for release on Thursday, in the form of weekly jobless claims. First-time unemployment claims fell well below the expected range last week, according to data released by the Labor Department. Initial claims for state unemployment benefits declined by 19,000 to a seasonally adjusted 223,000 in the week ended February 25, official data showed. The current figure is better than the consensus expectation of 243,000 claims. This marks the 104th straight week that claims are below the threshold 300,000 figure, which signals a fairly robust, healthy labor market.
Currently, the probability of a short-term rate hike in March is 75.3%, according to the CME Group’s FedWatch tool. That’s up 6.7% from the previous 68.6% on Tuesday. Nobody knows, whether the Fed will raise rates this month or not, but the odds are increasing. We anticipate that whenenver the monetary tightening happens mortgage interest rates will rise accordingly. With that said, borrowers who are looking to get a mortgage in the near future, may want to act sooner rather than later, to be able to take advantage of current low mortgage rates.