After a brief run-up in mortgage rates, Freddie Mac reported a 30 year fixed rate at 3.66%, down from 3.70% the previous week. One year ago, the 30 year clocked in nearly a full percentage point higher at 4.34%. The record low was set in late 2012 at 3.35%.
The average 15 year rate also drifted lower to 2.93% from 2.98%.
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The surprisingly poor unemployment news released on Friday April 3 had surprisingly little fallout. Both stocks and bonds took the jobs report in relative stride, paying more attention to the strength of the dollar and oil prices. Stocks initially took a beating for the next few days but most experts believed it could have been worse, given the paltry job creation count. In March, the economy added just 126,000 new jobs, nearly half the amount expected.
Mortgage Rate Forecast
- Given the weak jobs numbers, most anticipate the Fed will sit on the sidelines much longer than originally anticipated. Some had forecast an initial rate bump at the conclusion of the June FOMC meetings. Now, some are looking at the first rate move early next year although there’s still a lot of calendar left for 2015.
- We’ll get a handle on inflation both at the wholesale and retail level this week. The Fed would like to see an increase in prices overall yet given the fall in oil prices, that’s going to be hard to achieve. Still, taking out oil and food prices, inflation is still far off. In fact, falling prices have contributed to a slight deflationary bias. Since inflation is bad for rates, we probably won’t see rate increases, at least not due to inflation fears.
- Industrial Production and Capacity Utilization will give us an indication on the strength to the manufacturing sector on Wednesday. A peak into the future can be expected on Friday with the release of the Leading Economic Indicators.
Conclusion
The Dow closed above the 18,000 mark last week and the S&P 500 recorded its second straight week of gains. Mortgage backed securities performed better than was expected and the FNMA 30yr coupon closed last Friday at 102.12. Few are expecting anything from the Fed in the way of a rate increase over the next two quarters although that could change due primarily to geopolitical events.
Rates have held in this range, plus or minus 0.25% for several months and there appears to be little to move them out of this range. The bias however is toward the upside. Don’t expect the 30 year rate to fall much closer to the 3.35% record low.
