Mortgage rates inched higher on Tuesday, as investors have remained in a wait-and-see mode ahead of the release of February’s Non-Farm Payrolls report. Pricing on U.S. treasury bonds weakened yesterday, and several lenders adjusted their rate sheets with slightly higher borrowing costs. Most mortgage shoppers will notice the changes in slightly higher upfront costs as opposted to higher contract rates. The average lender is offering the 30-year fixed mortgage at a rate of 4.250%, as of this writing.
Yields on treasury bonds have been on an upward trajectory lately. The benchmark 10-year treasury yield closed yesterday’s trading session at 2.52%, which translates to a 3 basis points increase over the previous 2.49% from a day earlier. When the yield on the top-rated 10-year note increases, mortgage rates usually follow suit. With that said, current mortgage rates are slightly higher than rates in the beginning of the week. However, with little economic data coming out until Friday, we don’t expect major net changes in mortgage rates in the next few days.
Pricing on mortgage-backed securities (MBS), which most directly influence mortgage rates, are in the red this Wednesday morning, following a release of a stronger-than-expected ADP Employment Situation report (more on that later). If the current trend continues with regards to MBS prices, mortgage rates could lose some more ground today.
The main piece of domestic economic news this Wednesday is ADP’s Employment Situation report. The payroll processor reported today that employment in the private sector increased by 298,000 last month, well above economists’ expectations. ADP estimated to record 189,000 private sector jobs in February. As far as January’s employment data is concerned, private payroll gains were revised up to 261,000 from the orignally reported 246,000 jobs.
Comments from several Fed policymakers signaled last week, that the U.S. central bank could be ready to raise rates at the next FOMC meeting in mid-March, unless a shockingly weak employment report comes out this week. Well, it appears there’s little chance that the employment data will disrupt the central bank’s plans to tighten monetary policy. If the upcoming Non-Farm Payrolls data will be close to the ADP’s job figure, that could bolster speculation, that the Fed will have to accelerate the pace of rate increases going forward. The comprehensive Non-Farm Payrolls report, which features both public and private sector employment, is scheduled for release on Friday.
According to the closely-watched CME FedWatch tool, which tracks the 30-day Fed Fund futures prices, traders currently see a 90.8% chance of a rate hike at the next FOMC meeting, up 8.9% from the previous 81.9% probability registered a day earlier.
Mortgage rates have been in a tight range for a while now. However, low mortgage rates could face a danger as early as Friday, when February’s Non-Farm Payrolls data rolls out. If the job numbers exceed the consensus expectation, mortgage rates will most likely rise. Moreover, a positive employment report could cement a rate increase at the Fed’s next meeting on March 14-15. On the other hand, if February’s job data fails to live up to expectations, mortgage rates could slide.
Current mortgage interest rates are holding firm at several top U.S. lenders, according to our observations. At Bank of America (NYSE:BAC), 30-year fixed home purchase loans are available today at a rate of 4.500%. The shorter-term, 15-year fixed conventional home loan is up for grabs for as low as 3.875%. The lender’s refinace loan program includes the 30-year FRM, which can be locked in at a rate of 4.500%. Borrowers, who are looking to secure the 15-year fixed home refinance loan, can expect to pay 4.000% interest, according to today’s mortgage information.
At another major U.S. financial instution, Wells Fargo (NYSE:WFC), the standard 30-year fixed conventional home loan starts at a rate of 4.375%. The FHA-backed 30-year home mortgage is another possible option. This type of loan is coming out at a rate of 4.500%, as of today. Those looking to take on the 30-year VA home loan, will see it being offered at a rate of 4.125%. Mortgage shoppers looking for home refinancing options, may want to check out the lender’s long-term 30-year fixed refinance mortgage, as it can be obtained at a rate of 4.500%. The 15-year refinance loan, which comes with a fixed interest rate over the term of the mortgage, is quoted at a rate of 3.750% this Wednesday. Borrowers, who believe the flexible 5/1 ARM fits the bill better, can expect to pay 3.750% interest cost.
The above mentioned interest rates are subject to change and are not guaranteed. Click here to search for live mortgage rate quotes at some of the top U.S. lenders.