For the week that ended on March 3, Freddie Mac reported the
benchmark 30-year fixed-rate mortgage rate increased to 3.64%. For the
week that ended on February 25, the mortgage rate has been at 3.62%.
This shows the upward trend of 0.55% over the week. As per the
Washington Post, improved economic data drove the benchmark mortgage
rates up.
According to the data released on Thursday by the Federal Home Loan Mortgage Corp. (OTCMKTS:FMCC),
15-year fixed-rate mortgage rate was at 2.94%, and five-year adjustable
rate increased to 2.84%. The week that ended on February 25 had 15-year
rate at 2.93% and five-year adjustable rate at 2.79%. This indicates
improvement of 0.34% in 15-year fixed rate mortgage rate while five-year
adjustable rate increased 1.8% over the week.
Freddie Mac chief economist, Sean Becketti
stated: “The market turbulence that kicked off the year subsided at the
end of February, providing at least a temporary break in the flight to
quality.” He added that the treasury yields have approached the highest
point in a month, which drove the growth in 30-year fixed-rate mortgage
rate to 3.64%.
However, recently Federal Reserve officials have hinted unchanged
interest rates at 0.5%. Federal Reserve’s Vice Chairman Stanley Fischer
hinted that there is no rush to hike rates in short-term. He emphasized
that if more-than-full employment sustains, then only inflation rate
will reach the target of 2%. Federal Reserve Governor Jerome Powell
stressed that the central bank’s decision for rate hike is data-driven.
Federal Fund future prices projection outlines that there is 94.2%
probability of unchanged rates and 5.8% probability of quarter-point
rate hike to 0.75%.
Consumer spending improved in January, as the core PCE index improved
1.7% year-over-year (YoY). According to the US Department of Commerce,
seasonally adjusted total construction spending increased 10.4% YoY in
January. As per the February Manufacturing ISM Report on Business, the
PMI improved and stood at 49.5% in February, up 1.3% from January. The
PMI figure below 50% means the manufacturing economy is contracting.
Consequently, the manufacturing index improved while the sector remained
in contraction phase.
Since the consumer spending, construction spending and
manufacturing sector improved, so the investors sentiments improved as
well. In addition, the 10-year treasury yield improved 5.2% on March 1.
In March, the 10-year treasury yield gained nearly 0.4%, from March 1
till March 3. Owing to enhanced investor sentiments and improved
treasury yield, mortgage rate also followed the trend and moved up.
On the contrary, mortgage applications were down as the market
composite index fell 4.8% over the week. The refinance index fell 7%,
and purchase index fell 1% over the week. Improved mortgage rates
hampered the mortgage related activity (refinancing, applications and
purchase) which were up last week. If Federal Reserve decides to keep
interest rate at the current level, then mortgage-related activities are
likely to increase.
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