Many who were expecting another robust quarterly output for Q4 of last year were disappointed. On the bright side, the news suppressed any major mortgage rate increases.
According to mortgage loan backer Freddie Mac, the 30-year fixed mortgage notched up a bit from 3.63% to 3.66% and the 15-year rose by five basis points to 2.98%. Freddie released these results Thursday last week.
Then on Friday, mortgage bond prices went up due to Q4 GDP numbers, causing rates to come back down.
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The GDP number and was a bit lower than expected at 2.4% annual growth. Analysts predicted 3.0% growth as the US came off two consecutive quarters of healthy numbers, especially the Q3 GDP coming in at a robust 5.0%.
It is expected that lower prices at the pump will result in more consumer spending on other goods and services, boosting the GDP for the current quarter. Those numbers won’t be released until late April, so there’s no immediate threat of rising rates.
For this week, there is a full slate of economic reports to be released with Construction Spending, Factory Orders and Auto Sales. On Friday, the unemployment report along with nonfarm payroll figures will be reported.
The unemployment rate came in at 5.7% in December, and 240,000 new jobs were added. The market is anticipating a rate similar to that of December and perhaps a bit softer as it relates to new job creation.
The Dow closed out January at 17,164, down 251. That’s two months in a row the Dow finished lower. Typically a falling stock market means more funds invested in U.S. Treasuries and mortgage bonds, driving mortgage rates lower.
To help with lower rates even more, the European Central Bank (ECB) announced a new round of stimulus starting in March to the tune of $70 billion per month. Russia also cut a key interest rate, which was a surprise to some, but with the lower oil prices appearing to remain at current levels at least until the end of the year, the Russian move might have zero effect, which will put a drag on European economies at the same time.
Keep an eye out for Friday’s jobs numbers, a weaker reading could push rates lower.