Mortgage rates tick lower as government shutdown persistsby Tim Manni
Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.
With the government shutdown persisting and the surprise inaction by the Fed in September now behind us, mortgage rates are wandering across a valley floor of sorts. How long mortgage rates will wander along this bottom is unknown, but for now, mortgage rates are mostly lower as a result.
Mortgage rates maintain early-summer lows
- 30-year: HSH.com’s Fixed-Rate Mortgage Indicator found that the overall average rate for a 30-year fixed-rate mortgage (conforming, non-conforming and jumbo) slipped by just a single basis point (0.01 percent) to 4.42 percent.
- 15-year: The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbo) also managed to trim just a lone basis point (0.01 percent) from the previous week’s figure, easing to 3.55 percent.
- FHA: FHA-backed 30-year fixed-rate mortgages bucked the trend with a rise of three basis points to land at 4.07 percent.
- 5/1 ARM: The overall 5/1 Hybrid ARM gave up another two hundredths of a percentage point (0.02 percent) moving softly to 3.18 percent for the week ending October 11.
Fed’s September decision was a split one
The decision for the Fed to hold fast and maintain present levels of QE support was a split one, at least as can be gleaned from the minutes of the September meeting.
The minutes noted that “those who preferred to maintain for now the pace of purchases… viewed incoming data as having been on the disappointing side… [and] were not yet adequately confident of continued progress.”
Conversely, those who were in favor of trimming purchases “viewed those data as broadly consistent with the Committee’s outlook… and were generally satisfied that… [economic and labor market] conditions laid out in June had been met.”
Even though these folks were leaning toward a reduction in asset purchases, “they favored a relatively small reduction to signal the Committee’s intention to proceed cautiously,” the notes revealed.
Ultimately, the first group won out, convincing the others that erring on the side of caution held few risks, at least for the moment. With plenty of headwinds to economic growth, let alone the impact of the fiscal stalemate (and any debt-ceiling debacle which may come), there seemed little reason to make the change, excepting perhaps the risk that markets might find any future advance guidance less believable.
Coming this week…
We’re of the mind that mortgage rates are poised to move very little this week, but if the Federal impasse should clear, we might see mortgage rates bump upward a few basis points.