What’s Ahead For Mortgage Rates This Week – October 2, 2023

Last week, consumers were treated to several indicators on inflation that not only paint a picture of the economy’s health but also give the Fed more information to work with as it continues to aim for a soft landing.

August Sees a Slight Upward Trend in Inflation

This week, the personal consumption expenditures price index, which excludes more volatile commodities like food and energy, increased 0.1 percent for the month. This is lower than the expected value of 0.2 percent, which indicates that the rising interest rates are starting to have an impact on the economy as the Fed continues to work to bring down inflation.

When compared to the previous 12 months, the price index was up 3.9 percent. This matched expectations and shows that inflation could finally be turning a corner. In addition, consumer spending rose 0.4 percent in August, which is down sharply from 0.9 percent in July. This is another indicator that higher interest rates are having an impact on consumers, who are finally pulling back on their spending.

As the month continues to progress, a lot of people will wait and see how the Fed’s decision to hold interest rates steady will impact the economy. Those looking for houses will probably be excited that interest rates were held steady, but it will be interesting to see how this decision impacts the fight against inflation.

Mortgage Rates Continue To Rise

This week, the 30-year fixed mortgage rate sits at around 7.59 percent on average, which remains one of the highest rates in decades. In August, the average rate was 7.18 percent, indicating that rates have gone up sharply. This is also up slightly from the previous week, where the average 30-year fixed rate was 7.51 percent.

What's Ahead For Mortgage Rates This Week - October 2, 2023In addition, 15-year fixed mortgage rates have gone up as well, with the national average sitting at around 6.82 percent. This is up from last week, when the average 15-year fixed was 6.51 percent. This is also up slightly from August, where the rates hovered around 5.84 percent.

Because the Federal Reserve decided to hold interest rates study, many home buyers are hoping that mortgage rates will stabilize for a couple of months. It remains to be seen if that will happen.

Consumer Sentiment Might Be Stabilizing

The consumer sentiment report from the University of Michigan is stabilizing, with numbers for September coming in at around 68.1. While this is a slight dip from August’s average numbers, the numbers for September are starting to rise.

Consumers might be starting to relax a little bit because inflationary numbers are starting to come down. For consumer sentiment to rise further, mortgage rates might have to come down without contributing to a spike in inflation or home prices.

This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.

Looking To Next Week

Next week, the unemployment data is going to be released, as initial jobless numbers are going to come in. This is a key indicator because rising interest rates generally lead to more layoffs, which could jeopardize the Fed’s goal of a soft landing.

What’s Ahead For Mortgage Rates This Week – October 2, 2023

Last week, consumers were treated to several indicators on inflation that not only paint a picture of the economy’s health but also give the Fed more information to work with as it continues to aim for a soft landing.

August Sees a Slight Upward Trend in Inflation

This week, the personal consumption expenditures price index, which excludes more volatile commodities like food and energy, increased 0.1 percent for the month. This is lower than the expected value of 0.2 percent, which indicates that the rising interest rates are starting to have an impact on the economy as the Fed continues to work to bring down inflation.

When compared to the previous 12 months, the price index was up 3.9 percent. This matched expectations and shows that inflation could finally be turning a corner. In addition, consumer spending rose 0.4 percent in August, which is down sharply from 0.9 percent in July. This is another indicator that higher interest rates are having an impact on consumers, who are finally pulling back on their spending.

As the month continues to progress, a lot of people will wait and see how the Fed’s decision to hold interest rates steady will impact the economy. Those looking for houses will probably be excited that interest rates were held steady, but it will be interesting to see how this decision impacts the fight against inflation.

Mortgage Rates Continue To Rise

This week, the 30-year fixed mortgage rate sits at around 7.59 percent on average, which remains one of the highest rates in decades. In August, the average rate was 7.18 percent, indicating that rates have gone up sharply. This is also up slightly from the previous week, where the average 30-year fixed rate was 7.51 percent.

What's Ahead For Mortgage Rates This Week - October 2, 2023In addition, 15-year fixed mortgage rates have gone up as well, with the national average sitting at around 6.82 percent. This is up from last week, when the average 15-year fixed was 6.51 percent. This is also up slightly from August, where the rates hovered around 5.84 percent.

Because the Federal Reserve decided to hold interest rates study, many home buyers are hoping that mortgage rates will stabilize for a couple of months. It remains to be seen if that will happen.

Consumer Sentiment Might Be Stabilizing

The consumer sentiment report from the University of Michigan is stabilizing, with numbers for September coming in at around 68.1. While this is a slight dip from August’s average numbers, the numbers for September are starting to rise.

Consumers might be starting to relax a little bit because inflationary numbers are starting to come down. For consumer sentiment to rise further, mortgage rates might have to come down without contributing to a spike in inflation or home prices.

This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.

Looking To Next Week

Next week, the unemployment data is going to be released, as initial jobless numbers are going to come in. This is a key indicator because rising interest rates generally lead to more layoffs, which could jeopardize the Fed’s goal of a soft landing.

What’s Ahead For Mortgage Rates This Week – September 25, 2023

What's Ahead For Mortgage Rates This Week - September 25, 2023Last week’s economic reports included readings on U.S. housing markets, housing starts and building permits, and the scheduled post-meeting statement from the Federal Open Market Committee of the Federal Reserve. Data on sales of previously owned homes were released along with weekly reports on mortgage rates and jobless claims.

National Association of Home Builders: Rising Mortgage Rates Shake Builder Confidence

Homebuilders lost confidence in U.S. housing market conditions in September. September’s index reading was 45 as compared to the expected reading of 49.5 and August’s reading of 50. The combination of rising mortgage rates and high home prices presented obstacles to first-time and moderate-income buyers, while homeowners delayed listing homes for sale while awaiting lower mortgage rates. Low inventories of previously owned homes for sale drove would-be buyers to consider purchasing new homes.

Home builders offered price cuts averaging 25 percent to buyers in August; the price cuts were deeper in September with cuts averaging 32 percent. The NAHB said 59 percent of home builders offered buyer incentives other than price cuts.

Building Permits Rise as Housing Starts Fall in August

The Commerce Department reported 1.54 million building permits issued in August as compared to 1.44 million permits issued in July. The August reading exceeded analysts’ expectations of 1.45 million building permits issued in August. Housing starts fell to 1.28 million starts in August as compared to July’s reading of 1.44 million starts and the expected reading of 1.43 million housing starts in August.

Sales of previously owned homes fell to 4.04 million sales in August as compared to July’s reading of 4.07 million sales and the expected reading of 4.10 million sales.

Fed Leaves Key Interest Rate Range Unchanged

The Federal Open Market Committee of the Federal Reserve announced its decision to leave the federal funds rate range unchanged at 5.25 to 5.50 percent, but policymakers hinted at another rate hike before the end of 2023. FOMC members review a variety of domestic and global financial and economic data to inform their decision-making process.

Mortgage Rates Rise, Jobless Claims Fall

Freddie Mac reported fixed mortgage rates above 7 percent last week. The average rate for 30-year fixed-rate mortgages was one basis point higher at 7.19 percent. The average rate for 15-year mortgages rose by three basis points to 6.54 percent.

First-time jobless claims fell to 201,000 claims last week as compared to the previous week’s reading of 221,000 new claims and the expected reading of 225,000 claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on new home sales, S&P Case-Shiller home price indices,  the Federal Reserve Chair’s speech, and reports on inflation. Weekly readings on mortgage rates and jobless claims will also be released.

 

What’s Ahead For Mortgage Rates This Week – September 18, 2023

What's Ahead For Mortgage Rates This Week - September 18, 2023The previous week offered a blend of economic updates, encompassing data on inflation trends, the pulse of consumer sentiment, and the weekly oscillations in mortgage rates and unemployment claims.

August Sees a Slight Upward Trend in Inflation

The latest data on monthly inflation was made public on September 13th, revealing that core inflation in August experienced a jump of 0.3 percent over its July reading. This number is a tad above the anticipated 0.2 percent and also overshadows July’s reading, which was set at 0.2 percent relative to the preceding month. Drawing from the Consumer Price Index, August witnessed a year-over-year inflation of 3.7 percent.

In a broader perspective, the inflation rate observed a 2.4 percent increase in the past quarter when compared to the same timeframe a year ago. This is a downward shift from the 5.0 percent recorded in the previous quarter and marks the most modest inflation rate since March of 2021. As September progresses, all attention will turn to the Federal Reserve’s impending meeting. Given that the current inflation is above the Fed’s target of 2.0 percent, speculations are circulating about whether an interest rate rise is on the horizon or if the existing rate adjustments will be given more time to work.

A Shift in Mortgage Rates and Employment Dynamics

The current 30-year fixed mortgage rate hovers around 7.51 percent, one of the highest rates seen in two decades. This is an upward jump from August, where the rates averaged at 7.18 percent. This trend is impacting potential homeowners. Meanwhile, the 15-year fixed mortgage rate stands close to 6.51 percent, mirroring August’s average, which rounded off at 6.55 percent.

Comparing the current mortgage figures to those of the previous week, there’s been a marginal decline in the 30-year fixed rate from 7.55 percent to 7.51 percent. The 15-year fixed rate remains relatively stable at 6.51 percent, with the past week’s average being 6.52 percent. These rising interest rates seem to be impacting in the broader economy, with a projected 6.4 million individuals unemployed, translating to a 3.8 percent rate. The US Department of Labor’s Bureau of Labor and Statistics pinpointed 1.8 million claims for unemployment benefits in August.

Consumer Sentiment: A Mild Dip

The University of Michigan released its consumer sentiment report for the month, showing a slight drop in consumer optimism. While August’s index stood at 69.5, September witnessed a dip, bringing it down to 67.7.

This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.

Looking Forward

The next week promises updates on mortgage rates, while September 20th is the Federal Reserve’s next meeting. The focal point for many will be the Fed’s decision on the interest rates—whether they opt for another raise or choose to hold them steady for the upcoming period.

What’s Ahead For Mortgage Rates This Week – September 11, 2023

What's Ahead For Mortgage Rates This Week - September 11, 2023Last week’s scheduled economic reporting was limited due to the U.S. Labor Day holiday on Monday. The Federal Reserve released its Beige Book report and weekly readings on mortgage rates and jobless claims were also published.

Federal Reserve Releases Beige Book Report

The Beige Book report is a summary of information supplied to Federal Reserve policymakers by their business and professional contacts. Highlights of September’s Beige Book report included:

  • Accelerated leisure spending by consumers boosted economic growth during July and August.
  • Non-essential retail sales slowed, but the economy was boosted by a final stage of post-COVID-19 pent-up demand.
  • Prices for consumer goods fell faster than in many other sectors.
  • Auto sales rose due to better inventories available to consumers but increased sales were not connected with rising consumer demand for vehicles.
  • Rising business costs reduced profit margins.

The Beige Book report is published eight times a year before scheduled meetings of the Federal Reserve’s Federal Open Market Committee.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 7.12 percent and were six basis points lower than in the previous week. Rates for 15-year fixed-rate mortgages were three basis points lower and averaged 6.52 percent.

Initial jobless claims were lower with 216,000 first-time claims filed as compared to the prior week’s reading of 229,000 initial jobless claims filed. Analysts expected a reading of 230,000 new jobless claims filed.

What’s Ahead

This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.

What Is A Floating Interest Rate?

What Is A Floating Interest Rate?A floating interest rate, also known as a variable interest rate or an adjustable rate, is an interest rate that can change over time. Unlike a fixed interest rate, which remains constant for the entire duration of a loan or investment, a floating interest rate fluctuates periodically based on certain factors or benchmarks.

The advantage of a floating interest rate is that it can offer flexibility. When interest rates are low, borrowers can benefit from reduced interest payments. However, if interest rates rise, the cost of borrowing will also increase.

How Does A Floating Rate Work?

A floating interest rate works by adjusting periodically based on a predetermined formula or benchmark. Here’s a general overview of how a floating rate typically operates:

Selection of a Benchmark: When entering into a loan or investment agreement with a floating rate, a benchmark or reference rate is chosen. Common benchmarks include the prime rate, LIBOR, or a government bond yield. The benchmark serves as a starting point for calculating the interest rate.

Margin or Spread: In addition to the benchmark, a margin or spread is set. The margin remains constant throughout the loan or investment term and is added to the benchmark to determine the final interest rate. For example, if the chosen benchmark is 3% and the margin is 2%, the floating interest rate would be 5%.

Periodic Rate Adjustments: The frequency of rate adjustments is specified in the loan or investment agreement. The interest rate may be adjusted annually, quarterly, monthly, or even daily, depending on the terms. At each adjustment period, the interest rate is recalculated based on the current value of the benchmark.

The Pros And Cons Of Using A Floating Rate Mortgage Loan

Using a floating rate mortgage loan, also known as an adjustable-rate mortgage (ARM), has both advantages and disadvantages. Here are some of the pros and cons to consider:

Pros:

Initial Lower Interest Rate: One of the main advantages of a floating rate mortgage is that it often starts with a lower interest rate compared to a fixed-rate mortgage.

Potential for Future Savings: If interest rates decrease over time, borrowers with a floating rate mortgage can benefit from lower monthly payments.

Flexibility: Floating rate mortgages often provide more flexibility than fixed-rate mortgages. Depending on the terms of the loan, borrowers may have the option to refinance or sell the property without incurring significant prepayment penalties.

Cons:

Uncertainty and Rate Fluctuations: The main disadvantage of a floating rate mortgage is the uncertainty associated with rate fluctuations. The interest rate is subject to periodic adjustments based on market conditions, which means the monthly payment can change over time.

Potential for Higher Costs: If interest rates increase significantly during the loan term, borrowers may end up paying more in interest over the long run compared to a fixed-rate mortgage.

Limited Predictability: Unlike a fixed-rate mortgage, where the monthly payment remains constant throughout the loan term, a floating rate mortgage introduces uncertainty.

Refinancing Risk: If interest rates rise substantially, it may become more challenging to refinance the mortgage or obtain a new loan with favorable terms.

It’s essential for borrowers to carefully evaluate their financial situation, risk tolerance, and future plans before opting for a floating rate mortgage. Assessing the potential impact of rate fluctuations and considering long-term financial goals can help borrowers make an informed decision.

Consulting with a financial advisor or mortgage professional is recommended to fully understand the implications of a floating rate mortgage and determine if it aligns with your needs.

What’s Ahead For Mortgage Rates This Week – August 14, 2023

What's Ahead For Mortgage Rates This Week - August 14, 2023Last week’s economic reporting included readings on inflation, consumer sentiment, and weekly readings on mortgage rates and jobless claims.

Inflation Rate Holds Steady in July

Month-to-month inflation rose at a pace of 0.20 percent in July and met analysts’ expectations. There was no change in the pace of month-to-month inflation from June’s reading of 0.20 percent growth. The Consumer Price Index also reported that year-over-year inflation reached 9.10 percent, which was the highest reading since reaching a 40-year high in mid-2022.

Core inflation, which excludes volatile food and fuel prices, was unchanged from June’s month-to-month pace of 0.20 percent growth. July’s month-to-month reading matched analysts’ expectations. Year-over-year core inflation dipped slightly to 4.70 percent in July as compared to June’s reading of 4.80 percent year-over-year inflation.

Federal Reserve leaders said that they would continue monitoring domestic and global economic developments along with financial and economic data before determining whether or not to raise the Fed’s key interest rate range.

Mortgage Rates, Jobless Claims Rise

Freddie Mac reported higher mortgage rates for the third consecutive week. The average rate for a 30-year fixed-rate mortgage approached seven percent and rose by six basis points to 6.96 percent. Rates for 15-year fixed-rate mortgages rose by nine basis points to 6.34 percent.

248,000 initial jobless claims were filed last week, which surpassed expectations of 231,000 new claims filed and the previous week’s reading of 227,000 first-tine jobless claims filed.

University of Michigan Consumer Sentiment Survey

In other news, the University of Michigan released its monthly preliminary reading on U.S. consumer sentiment.

Consumer sentiment rose to an index reading of 72.0 in August as compared to the July reading of 71.6.  The majority of.consumers surveyed indicated that the economy improved in the three months leading up to the survey., Component readings included consumer sentiment index readings for current economic conditions and economic conditions within the next six months. The survey reading for consumer sentiment about economic conditions over the next six months fell to an index reading of  67.3 from the July reading of 68.3 Readings over 50 indicate that most consumers are confident about current economic conditions.

Joanne Hsu, the University of Michigan’s director of consumer surveys, said: “…In general, consumers perceived few differences in the economic environment from last month, but they saw substantial improvement relative to just three months ago.”

What’s Ahead

This week’s scheduled economic reporting includes reading on housing starts and building permits issued, the minutes of the Federal Reserve’s recent meeting of its Federal Open Market Committee, and weekly readings on mortgage rates and jobless claims. 

What’s Ahead For Mortgage Rates This Week – August 7, 2023

What's Ahead For Mortgage Rates This Week - August 7, 2023Last week’s scheduled economic reporting included readings on construction spending, public and private sector payroll growth, and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims were also released.

Construction Spending Slips in June

U.S. construction spending slipped by 0.60 percent to 0.50 percent growth in June; analysts expected a month-to-month reading of  0.70 percent growth in construction spending. Year-over-year construction spending increased by 3.50 percent of which single-family residential construction accounted for 2.10 May’s reading for construction spending was revised from  0.90 percent growth to 1.10 percent growth from May to June.

Private residential construction rose by 0.30 percent in June. Spending on public residential construction decreased by -0.20 percent.

July Payroll Growth Shows Mixed Results

ADP reported 324,000 private sector jobs added in July. Analysts predicted only 175,000 private sector jobs added in July while June’s reading showed 455,000 jobs added. The federal government’s Nonfarm Payrolls report showed 187,000 jobs added in July.  Analysts expected 200,000 public and private sector jobs added in July while June’s reading showed 185,000 public and private sector jobs added.

The U.S. national unemployment rate dropped to 3.50 percent in July from June’s reading of 3.60 percent.

Mortgage Rates and Initial Jobless Claims Rise

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose to 6.90 percent. The average rate for 15-year fixed-rate mortgages rose by 14 basis points to 6.25 percent.  The Commerce Department reported that 227,000 jobless claims were filed last week,  which matched expectations and was higher than the 221,000 unemployment claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings on inflation and consumer sentiment. Weekly reports on mortgage rates and jobless claims will also be released.

What’s Ahead For Mortgage Rates This Week – July 31, 2023

What's Ahead For Mortgage Rates This Week - July 31, 2023Last week’s economic reporting included readings on the Fed’s interest rate decision, S&P Case-Shiller’s Home Price Indices, sales of new homes, and pending home sales. Weekly readings on mortgage rates and jobless claims were also released.

The Federal Reserve raised its target interest rate range to 5.25 to 5.50 percent; this announcement signaled that rates for home loans and unsecured credit would also rise.

S&P Case-Shiller Reports Slower Home Price Growth  in May

Average  U.S. home prices fell in May according to the S&P Case-Shiller 20-City Home Price Index. Home prices were -1.70 percent lower as compared to an expected dip of -1.90 percent and April’s reading of -1.70 percent. The top three cities reporting the highest pace of year-over-year home price growth were Chicago, Illinois with home price growth of 4.60 percent; Cleveland Ohio, where home prices grew by 3.90 percent, and New York City, where home prices rose by 3.50 percent.

Sales of previously owned homes fell due to high demand and slim supplies of homes for sale. Homeowners stayed on the sidelines while waiting for lower mortgage rates, but prospective buyers didn’t seem discouraged by rising rates, which recently approached 7 percent.

Craig J. Lazzara, managing director at S&P Case-Shiller Indices, said that the rally in U.S. home prices continued in May.

New home sales fell to a seasonally adjusted annual pace of 697,000 sales in June. Analysts estimated a pace of 725,000 sales and May’s reading showed a pace of 715,000 new home sales. Higher home prices in popular metro areas and rising mortgage rates created affordability challenges for first-time and moderate-income home buyers.

In related news, the FHFA Home Price Index reported that home price growth for homes owned and sold by Fannie Mae and Freddie Mac rose by 0.70 percent in May and was unchanged from April’s pace of home price growth. The FHFA reported year-over-year home price growth of 2.80 percent.

Mortgage Rates Rise as Jobless Claims Fall

Freddie Mac reported higher mortgage rates for the fourth consecutive week as the average rate for 30-year fixed-rate mortgages rose by three basis points to 6.81 percent. The average rate for 15-year fixed-rate mortgages was five basis points higher at 6.11 percent.

First-time jobless claims fell to 221,000 claims as compared to the previous week’s reading of 228,000 claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending,  public and private-sector payrolls, and the national unemployment rate. Weekly readings on mortgage rates and first-time jobless claims will also be released.

What’s Ahead For Mortgage Rates This Week – July 17, 2023

What's Ahead For Mortgage Rates This Week - July 17, 2023Last week’s economic reporting included readings on month-to-month and year-over-year inflation and consumer sentiment. Weekly readings on mortgage rates and jobless claims were also published.

Month-to-Month Inflation Rises as Year-Over-Year Inflation Slows

The Consumer Price Index for June rose 0.20 percent in June as compared to May’s reading of 0.10 percent growth and expectations of 0.30 percent month-to-month growth. The core CPI reading, which excludes volatile food and fuel sectors, fell to 0.20 percent growth in June as compared to May’s month-to-month reading of 0.40 percent growth.

The year-over-year reading for the Consumer Price Index in June slowed to 3.00 percent growth as compared to May’s reading of 4.00 percent and analysts’ expected reading of 3.10 percent year-over-year growth.

The year-over-year reading for the Core Consumer Price Index showed 4.80 percent growth; analysts expected year-over-year inflationary growth of 5.00 percent. May’s year-over-year inflation reading showed 5.30 percent growth. Year-over-year readings show overall inflation trends without month-to-month volatility.

Rising interest rates did not appear to impact consumers’ enthusiasm. July’s preliminary index reading of 72.60 for the Consumer Sentiment Index was the highest reading published since September 2021. Analysts expected an index reading of 65.50 as compared to June’s reading of 64.40.

Mortgage Rates Nearing 7 Percent

Average mortgage rates rose last week and approached 7.00 percent for 30-year fixed-rate mortgages according to Freddie Mac’s weekly Primary Mortgage Market Survey.  The average rate for 30-year fixed-rate mortgages rose by 15 basis points to 6.96 percent. The average rate for 15-year fixed-rate mortgages rose six basis points to  6.30 percent. July 13 jobless claims will be published this week.

What’s Ahead

This week’s scheduled economic reporting includes readings on home builder confidence in single-family housing market conditions, and government reporting on housing starts and retail sales. The National Association of Realtors® will release its monthly report on sales of previously-owned homes. Weekly readings on mortgage rates and jobless claims are also expected.