Rates on 30-year fixed-rate mortgages slightly dipped on Monday (May 8) to 4.02% from 4.03% last Friday (May 5). Mortgage rates held steady as last week’s events provided little motivation for them to go higher than they were. However, this week opened with a weak, quiet MBS bond market, which dictates mortgage rates; and if this trend were to continue, we might see higher mortgage rates.
Just yesterday, May 8, Emmanuel Macron was elected as the new president of France. Mr. Macron not only eliminated his rival Marine Le Pen, his election eased the markets’ concerns over Frexit as espoused by Ms. Le Pen and the shake-up that could have awaited the European Union.
Bonds responded to the French elections results by regressing slightly, according to Mortgage News Daily.
Federal Jobs Report for April
The April employment situation was released on May 5 but it did not have the effect on mortgage rates as widely expected by experts. Essentially, there were 211,000 jobs created during the relevant month vis-a-vis a previous forecast of 185,000.
This stronger data could have pushed mortgage rates higher, in the normal course of things. But not so in the present case as the upward push was mainly contained by the fact that the increase in the jobs created was offset by the revised number for March from 98,000 to 79,000. As Mortgage News Daily pointed out, rates have been moving in a narrow, sideways direction for some time now that any changes have appeared inconsequential to the average borrower.
On its third scheduled meeting held on May 2 to 3, the Federal Open Market Committee (FOMC) convened to postpone raising short-term rates for now. There are five more FOMC meetings scheduled for this year.
“The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term,” part of the FOMC’s May 3 statement read.
Cleveland Fed President Loretta Mester thinks otherwise. A non-voter of the FOMC, Ms. Mester said that delaying any rate hike would risk a recession. She also called on the Fed to trim its $4.5-trillion portfolio of Treasury MBS. This means that the Fed will move from a buyer of MBS to a seller, which can’t be a good thing for rates, according to Michael A. Higley’s By the Numbers.
With some volatility expected in the coming days, locking at the first low rate opportunity is recommended. Lock your rate if you are 30 days of closing your loan. Those who have a longer window to close may float their rates to see how further they’d go lower.