Mortgage Rates Preview : Rates Still Rising On Housing, Jobs Data
Mortgage markets worsened again last week, posting sharp mid-week losses. FHA mortgage rates rose more than conforming ones.
The Ginnie Mae (GNMA) 3.0% 30-year coupon fell -16/32 last week, affecting FHA mortgage rates for purchase transactions and for the FHA Streamline Refinance. VA mortgage rates rates climbed, too, because VA loans are linked to Ginnie Mae bonds.
By comparison, the Fannie Mae (FNMA) 3.0% 30-year coupon fell -10/32 last week, pushing conforming mortgage rates higher, but not by as much as FHA ones. FHA pricing gave up one-half point last week.
Jumbo mortgage rates increased slightly.
Mortgage Rates Rise On Strong Housing Data
Mortgage rates rose last week the old-fashioned way -- on data. Consumer spending made gains, the housing market continued its run, and jobless data showed renewed strength.
In a recovering economy, mortgage rates tend to respond negatively to positive economic data.
The first data set to move mortgage rates last week was December's Retail Sales report. Led by auto sales and home furnishing, data from the U.S. Department of Commerce showed consumer receipts rising 0.5 percent, which outpaced November's gain of 0.4 percent. Combined, last years last two months erased concerns over October's spending slowdown.
Consumer spending accounts for more than two-thirds of the U.S. economy. Mortgage rates climbed on the release and continued to rise through Thursday morning, which witnessed the release of both the December Housing Starts data from the Department of Commerce; and an Initial Jobless Claims report from the Department of Labor.
Housing Starts posted blowout numbers. Builders broke ground on new homes at a seasonally-adjusted, annualized rate of 954,000, the fastest pace in more than 4 years. Single-family housing starts were similarly strong, also posting their best numbers since 2008.
In the jobs department, Initial Jobless Claims unexpectedly fell to 335,000 for the week prior -- the lowest level in five years.
Economists believe when first-time claims fall below 350,000, it signals strong job growth ahead and, since housing and jobs are believed to be the key elements in the nascent U.S. economic recovery, it's no surprise that Wall Street acted accordingly Thursday morning.
On the release of the housing and jobs data, mortgage rates soared, tacking on as much as 0.250 percentage points in a matter of minutes. Friday, rates retreated a tad, but not by enough to undue the week's cumulative damage.
Freddie Mac Undercut "Actual" Mortgage Rates
Unfortunately, Freddie Mac's weekly mortgage rate survey failed to capture the worsening of rates, giving false hope to mortgage rate shoppers nationwide.
Thursday morning, the government group released its Primary Mortgage Market Survey, an average of "prime" mortgage rates from 125 banks across the country. The survey is conducted Monday through Wednesday each week with the majority of responses fielded by Freddie Mac on Tuesday.
Because mortgage rates jumped Thursday -- after the survey had concluded -- Freddie Mac failed to capture the change. It showed the average 30-year fixed-rate mortgage rate falling 0.02 percentage point to 3.38% nationwide for homeowners willing to pay 0.7 discount points.
Thursday, that rate required 1.2 discount points, at least.
For mortgage applicants in cities such as San Diego, California; Bethesda, Maryland; and Fairfax, Virginia, where conforming loan limits extend to $625,500, that half-point difference equates to an additional $3,127 in closing fees.
Mortgage Rate Poised To Rise This week
This week, with more housing data due for release, mortgage rates may make another run higher.
Here's the economic calendar for the week ahead :
- Monday : Markets closed
- Tuesday : Existing Home Sales, from National Association of REALTORS®
- Wednesday : Home Price Index, from the Federal Home Finance Agency
- Thursday : Jobless Claims, from the U.S. Department of Labor
- Friday : New Home Sales, from the U.S. Department of Commerce
Mortgage rates have run-up since the New Year, adding to the cost of homeownership, and the Mortgage Bankers Association projects that rates will reach 4.4% before the end of 2013. If rising rates make you nervous, consider locking in today.
See where rates are now -- get started with a rate quote online.