Monday’s Market Trends Recapby Tim Manni
This week’s issue of HSH’s Market Trends Newsletter, “Mortgage Rates Ease Slightly,” examines how recent economic conditions like the health of Fannie Mae and Freddie Mac, and current spreads between 30-year Fixed Rate Mortgages and the 10-year Treasury have affected the movement of mortgage rates:
For their part, rates were steady to slightly lower for the week. HSH’s Fixed Rate Mortgage Indicator (FRMI), the average interest rate for all 30-year FRMs — including conforming, jumbo and expanded conforming offerings — slid below the 7% threshold for the first time in four weeks, closing our national survey at 6.99%, a three basis point (.03%) decline. For 5/1 Hybrid ARMs, the overall shed a lone basis point to finish the week at 6.63%.
We noted some discussions in the media this week about how wide the spreads have become for 30-year FRMs when compared against other benchmarks such as the 10-year Treasury. It’s true that spreads are extraordinarily wide for both conforming and jumbos, but we thought we’d look back into the past to see how today’s gap compares with history.
This issue also reported on how economic indicators like the Producer Price Index, Housing Starts, and the Index of Leading Economic Indicators reflected upon the current state of the market:
Some spread premium would also disappear if inflation cools. The Producer Price Index leapt by 1.2% in July after a 1.8% lift in June, so there’s little indication that price pressures are easing at the moment. While the ‘core’ rate of PPI lifted by ‘just’ 0.7%…
The Index of Leading Economic Indicators had nothing nice to say about the present state of the economy, as well. The LEI slipped by 0.7% during July, but much of the decline was due to the June building permits issue noted above, as it created a vacuum in the July calculation.
HSH’s free, weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers — receive it in your inbox by Friday night, so sign up today!