March 26th 2014
Mortgage rates stabilized this week in the wake of reaction last week to the Fed's hint that they would raise their rates sooner than the anticipated target date of late 2015. Even though the Fed fund rate is not directly tied to mortgage rates, even the smallest news that the Feds will hike their target rate can have a profound effect on the financial markets.
Last Wednesday, when the announcement came out, mortgage rates rose from 4.43 to 4.53, a full tenth of a percent. Because the financial markets had already had time to ponder news of the coming rate hike at length, however, reaction was not as extreme as it might otherwise have been. It now remains to be seen whether rates will come back down to the lower levels seen at the beginning of last week.
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The 30 year mortgage fixed rate mortgage declined a bit this week from the high of 4.56 percent seen last Thursday, the day following the Fed statement. This week, the rate declined a bit from Friday's closing figure of 4.53 and has held steady at 4.51, with only sideward movement.
There are a few events this week that might affect rates. On Wednesday the Treasury will auction 5-year notes, and on Thursday it will be auctioning off 7-year notes. Demand for U.S.-backed debt is generally good for the mortgage rates, so if the auction results are strong, there might be a slight decline in rates toward the end of the week.
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Although the rise in rates of almost .125 of a percentage point last week may seem like a disadvantage to buyers, it is important to consider that the busy real estate season is approaching and that even a small additional rate increase, combined with greater demand for housing, will boost the cost of home ownership considerably. Especially if rates drop slightly by the end of the week, now could be a good time to lock your mortgage rate.
March 10th 2014
Following last Friday's release of a stronger-than-expected Employment Situation report -- the most important gauge of the nation's economic health -- the Utah mortgage rates immediately rose to their highest level in 2 months. Although rates rebounded slightly by the end of the day, last week was overall the worst for mortgage rates since August, 2013, with rates reaching levels not seen since January 15.
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Treasury Rates were also influenced negatively by good news on the job front. The interest rate on the 10-year Treasury note closed 5.5 basis points higher at the end of the week, at 2.790%. The 10-year note interest rate for the week as a whole rose 13 basis points, which represents the largest weekly gain since early December.
The Federal Reserve will hold their next policy meeting on March 18-19 to determine whether it should continue to scale-back the central bank's bond-buying stimulus.
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The Employment Situation Report contained an interesting piece of data concerning the effect of winter weather on the job market. On average, 70,000 workers lost a full week of work in February due to inclement weather, but this year the figure was 120,000. One way to interpret that data is to argue that the payroll prints, which have declined significantly in the last few months, would have been stronger were it not for the severe weather.
However, some analysts feel that there may be another element of volatility that is affecting the lag in payroll creation. If payroll creation remains at its current average even once the weather improves, it will be good news for those who want mortgage rates to remain low. Right now it is a waiting game.
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Many mortgage analysts predict that rates could move still higher by the end of the week. The advice for those floating Utah mortgage rates in anticipation of a quick closing is to lock your rate soon.
Source: http://www.mortgagenewsdaily.com/consumer_rates/347735.aspx; http://www.mortgagenewsdaily.com/mortgage_rates/blog/347607.aspx; http://www.marketwatch.com/story/10-year-treasury-yield-highest-since-january-2014-03-07
March 3rd 2014
Over the last week of February, mortgage bonds that serves as a benchmark for many mortgages have gone up in value, slightly lowering Utah mortgage rates.
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Based on daily treasury yield curves from the U.S. Treasury Department, the 10-year Treasury closed last week at a yield of 2.73 percent, down from the monthly high of 2.80 percent set on February 12. While the treasury's yield ticked upwards during the beginning of the week, by the end of the week, bond values surged, dropping its yield to a much lower 2.66 percent. This correlates to lower mortgage rates by about 0.125% lower in rate.
The current yield represents a three week low for the benchmark bond. Much of the increase in its value comes from traders and investors that are seeking safety in the aftermath of the political tension in the Ukraine. The fear caused by the unrest related to disputes with Russia over the Crimea, balanced out good economic news in the Midwest, growing interest in home buying and positive measures of consumer confidence.
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While the economic recovery remains weak, global signs remain positive. All of this points to ongoing support for the Federal Reserve's tapering policy. As the Fed continues to taper bond buying, the next step is to allow interest rates to gradually return closer to historical norms. Higher interest rates will impact the cost of borrowing across the board, making everything from car loans to residential and commercial real estate loans more expensive.
While this week's fluctuations in mortgage rates were largely due to external forces, they remain a reminder that the market is ready to move yields around. Given the pressure from the Federal Reserve, it is likely that utah mortgage rates will continue to whipsaw in an overall upward direction for the foreseeable future, making it risky and potentially expensive to wait to take out new financing.
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We recommend cautiously floating, but being ready to lock in at a moments notice.
Sources: http://www.bloomberg.com/news/2014-02-28/treasuries-drop-as-euro-area-inflation-beats-economist-forecasts.html http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield http://www.cnbc.com/id/101456776