Mortgage rates improved on Friday, while bonds strengthened, as inflation expectations fell to record-low. According to the preliminary reading of the Universtity of Michigan’s latest consumer sentiment index for February, inflation expectations over the next 5-10 years dropped to a record-low 2.2% from the previous 2.5% estimation, the lowest figure since 1979. Following the news of a drop in inflation expectations, treasuries rallied and mortgage interest rates headed lower. A comparison of interest rates shows, that current mortgage rates are slightly lower than the ones available on Friday. Market data shows, that lenders on average are offering 30-year fixed mortgages at a rate of 4.250% in the best scenarios.
Pricing on treasury bonds increased on Friday, while yields moved lower. The top-rated 10-year treasury note finished the trading session at a yield of 2.50%, down 3 basis points compared to the yield a day earlier. The longer-dated 30-year treasury yield closed the trading day 3 basis points lower at 3.11%.
Mortgage-backed securities (MBS) are trading slightly in the green this Monday morning. If MBS pricing remains in positive territory throughout the day, today’s mortgage rates could see some improvements.
Current mortgage rates are higher across the country, according to mortgage-buyer, Freddie Mac’s latest survey released Thursday. The Virginia-based federal agency’s latest weekly Primary Mortgage Market Survey (PMMS) showed, the the average interest rate on the standard 30-year fixed convetional loan advanced 9 basis points to 4.30% last week. On average, mortgage lenders were quoting higher interest rates for 15-year fixed loans as well over the course of the past week. Currently, the 15-year fixed mortgage is coming out at a rate of 3.50%, up 8 basis points compared to the previous 3.42% a week earlier. The mortgage-finance company’s PMMS survey also showed, that the flexible 5-year ARM averaged a rate of 3.28% last week, an increase of 5 basis points.
While Freddie Mac’s data is very accurate as far as long-term mortgage trends are concerned, the PMMS survey collects responses from lenders on Monday and Tuesday, 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.
The first half of the week ahead will be fairly light in terms of significant economic data. The first meaningful economic report will come out on Wednesday, in the form of February’s existing home sales data. Existing home sales in February likely declined to a seasonally adjusted annual rate of 5.55 million units from January’s 10-year high (5.69 million units), analysts say.
New home sales data for February will see the light of day on Thursday morning. According to housing market experts, home sales likely edged up to a seasonally adjusted annual rate of 590,000 units in February. While current mortgage rates are a bit higher compared to those a couple of weeks ago, that seemingly didn’t have a major effect on the housing market yet. Back in January, purchases of newly-built U.S. homes rose 3.7% to a seasonally adjusted annual rate of 555,000 units, the Commerce Department’s data showed. This translates to a 5.5% increase in new home sales compared to data from a year earlier.
The consensus expectation is that durable goods orders likely increased 1.3% last month, following a 1.8% uptick in January. When transportation orders taken out of the equation, orders estimated to have increased 0.7%. The Commerce Department will release its report on February’s durable goods orders on Thursday.
Additional economic reports slated for release this week include weekly jobless claims, Chicago Fed national activity index, FHFA house price index and the Markit Flash U.S. composite index for March.
On the other hand, the week will be filled with plenty of Fedspeak, as several top U.S. central bankers will make public appearances, including Fed Chairwoman Janet Yellen. The speeches from Fed officials will likely attract attention from market watchers, a week after the Fed decided to raise rates. The first of many U.S. policymakers who addressed monetary policy this week was Chicago Fed President Charles Evans, who said in an interview on Fox Business Network TV this morning, that the central bank is on track to raise rates twice more this year. Evans also added, that he could be open to four rate hikes, should inflation creep higher over the Fed’s 2% target level.
The U.S. central bank hiked its benchmark short-term interest rate last week, but mortgage rates managed to avoid moving higher, as the market was already betting on the Fed to tighten monetary policy at its March meeting. A dovish tone in the Fed’s policy statement eased concerns among investors and traders that an upbeat economic outlook would urge central bankers to fasten the tightening cycle. With that said, current mortgage rates remain favorable for those looking to buy a new home or refinance an existing mortgage.