Inflationary pressure at the producer level and the manufacturing level are feebler than expected (reading based on the Producer Price Index) and this means that the demand for bonds will keep the yield chained. This then is good tidings for the mortgage market. We should also be looking very closely at the Consumer Spending data. It may provide a different argument. Consumer Spending is directly proportional to the growth of an economy. Mortgage bonds, being long-term securities, increase in their appeal when the economy is feebly placed. To extrapolate, higher consumer spending may decrease bond prices thus raising the mortgage rates.

Mortgage Rates: rates offer a mixed bag

This week’s Mortgage Banking Associations’ (MBA) weekly rate survey reveals a mixed performance across the board.

According to the MBA Weekly Survey: “The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 3.98 percent from 3.97 percent, with points increasing to 0.33 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.”

1 point in cost = 1% of the loan amount

“The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 3.90 percent from 3.91 percent, with points increasing to 0.27 from 0.26 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.”

“The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.37 percent, with points increasing to 0.30 from 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate remained unchanged from last week.” 

“The average contract interest rate for 5/1 ARMs increased to 3.52 percent from 3.28 percent, with points decreasing to 0.24 from 0.27 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.”

Mortgage Rate Activity and Predictions

The Bankrate’s weekly survey of mortgage and economic experts, countrywide, reveals that most experts believe rates will remain unchanged for the coming week (11th December to 18th December).

Out of those surveyed, 33% experts feel we are headed for a rate hike, another 11% sense a decline and 56% feel there will be no change (with a maximum movement of two basis points either side).

Freddie Mac’s weekly mortgage survey has reported that the conforming rates for the week- 5th December to 11th December- have risen by 0.05% for both 30Y Fixed and 15 Y Fixed.

Freddie Mac’s weekly mortgage survey noted, “With Federal Reserve policy on cruise control and the economy continuing to grow at a steady pace, mortgage rates have stabilized as the market searches for direction. The risk of an economic downturn has receded and, combined with the very strong job market, it should lead to a slightly higher rate environment. Since early September, when mortgage rates posted the year low of 3.49 percent, rates have moved up to 3.73 percent this week. Often, while higher mortgage rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted mortgage demand so far.”

Mortgage Rate Lock Advice

I would recommend you to Lock if you are closing within the next 3 weeks and Float if you are closing any time beyond that.