Jobs data released this week was very positive, with jobless claims at their lowest levels since 1969. On top of that, the frequently volatile Philadelphia Fed Business Outlook Survey came in at 34.4 versus the predicted 21.0.
As far as geopolitical events having an impact on trading we had some uncertainty over North Korea – South Korea talks even happening, let alone the historic meeting between a US Pres and North Korean leader. However, this did little to move the markets, as has the continuing back and forth over a US-China trade war. China is threatening to retaliate against US demands by imposing tariffs on it’s most significant imports from the US (aircraft, soybeans, and autos.) Neither country wants to see a trade war, as both have a lot to lose, but negotiations will likely stretch out over a year, at least.
There are no other economic reports this week and next week is short with the Memorial Day holiday coming. This gives the markets a chance to pause, but don’t look for a reversal of this bearish trend in the markets with inflation at its’ current level.
Mortgage Rates at Highest Level in Seven Years
This candlestick chart below covers this weeks’ Mortgage Backed Securities (MBS) activity and the impact on interest rates – a line of red which translates to rising rates, as predicted the previous week. MBS directly impact mortgage rates, and the days with red indicate higher and green lower rates.
This week’s Mortgage Banking Associations’ (MBA) weekly rate survey shows effective rates increased in almost all four loan categories we follow for loans with an 80% loan-to-value.
Per the MBA weekly survey: “The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.77 percent from 4.78 percent, with points remaining unchanged at 0.50 (including the origination fee.)”
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 $453,100) increased to 4.73 percent from 4.65 percent, with points decreasing to 0.35 from 0.36 (including the origination fee.)”
“The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.20 percent, with points increasing to 0.53 from 0.48 (including the origination fee.)”
“The average contract interest rate for 5/1 ARMs increased to its highest level in the history of the survey, 4.09 percent, from 4.00 percent, with points increasing to 0.56 from 0.43 (including the origination fee.)”
Mortgage Rates Next Week
Bankrate’s weekly survey of mortgage and economic experts, countrywide, shows a majority (55%) predicting interest rates will increase this coming week (plus or minus two basis points), while 18% see rates remaining unchanged, and 27% see them falling next week.
The chart below, from Freddie Mac’s weekly mortgage survey, shows conforming rates increasing from over the last week, May 11th to May 17th, for 30Y fixed, 15Y fixed and the 5/1 ARM.
In Freddie Mac’s weekly mortgage survey it was noted that “Healthy consumer spending and higher commodity prices spooked the bond markets and led to higher mortgage rates over the past week. Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.”
“While this year’s higher mortgage rates have not caused much of a ripple in the strong demand levels for buying a home seen in most markets, inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”
Lock That Rate!
Recommend locking in a rate now if you are purchasing or refinancing. There’s not much to gain from floating right now, and a lot to lose. The majority of lenders believe interest rates are going to increase in the short term and we are now seeing rates we haven’t seen since 2011.