Don’t expect decline in mortgage rates to continue


Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.

Mortgage rates managed to ease back last week, but don’t get used to them heading in that direction.

A solid employment report on Friday was sufficient to stem the slight downward move in that direction which was in place for most of last week. Without some softer economic data to offset the job report, mortgage rates will likely firm up again.

Mortgage rates fell last week’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) eased by seven basis points (0.07 percent) to 4.55 percent, taking back just a portion of the previous week’s huge jump.

We expected a larger fall in the overall average rate for 30-year fixed-rate mortgages, but Friday’s market conditions largely prevented that from happening.

The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) also managed a seven basis points (0.07 percent) decline 3.66 percent for the week.

FHA-backed 30-year fixed-rate mortgages saw a tenth of a percentage point trimmed off the previous week’s average, so there was a slide to 4.20 percent, and the overall 5/1 Hybrid ARM added to its average just a lone one one-hundredth of a percentage point (0.01 percent), with the average rising to 3.35 percent for the week ending July 5.

On track for higher mortgage rates

Mortgage rates managed a little dip last week, as the outsized market reaction from the last Fed meeting subsided, at least though July 3. However, the firm employment report on Friday generated another strong upward move in interest rates, and that puts us on track this week week to move higher again.

Late Friday, the influential 10-year Treasury yield had risen by some 20-plus basis points from Wednesday, and that should be more than sufficient to wipe out last week’s dip and then some.

Failing a spate of softness in the coming data–and this week features a fairly light calendar in that regard–the feature of the week will be the minutes of the last Fed meeting, which exacerbated the rout Mr. Bernanke initiated way back in May. Unless there’s something in the minutes to suggest otherwise (unlikely), we will expect to see mortgage rates rise by 10-15 basis points this week as volatility continues.

We suggest you check for daily updates this week to see how things are going.

HSH Associates Financial News Blog

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