June’s strong employment report led to more speculation that the Federal Reserve will reduce future bond purchases. Higher mortgage rates resulted.
Some of that speculation could be tempered by a closer look at details of the Federal Reserve’s recent meeting.
The 30-year fixed-rate mortgage (FRM) was 4.51 percent with an average 0.8 point, the week ending July 11, according to Freddie Mac’s weekly Primary Mortgage Market Survey.
Last week, the 30-year FRM averaged 4.29 percent. It was 3.56 percent a year ago.
“The economy gained 195,000 jobs in June, above the market consensus forecast, while revisions to the prior two months added 70,000 on top of that. Moreover, hourly wages rose by 2.2 percent over the last 12 months and represented the largest annual increase in nearly two years,” said Frank Nothaft, vice president and chief economist of Freddie Mac.
Meanwhile, the average interest rate on the 15-year FRM was 3.53 percent with an average 0.8 point, up from 3.39 percent last week. A year ago, the 15-year FRM averaged 2.94 percent.
For the 5-year Treasury-indexed hybrid adjustable rate mortgage (ARM), the average interest rate was 3.26 percent, with an average 0.7 point, up from last week’s 3.10 percent. A year ago, the 5-year ARM was 2.74 percent.
Finally, for the week ending July 11, Freddie Mac reported the 1-year Treasury-indexed ARM averaged 2.66 percent, with an average 0.5 point, unchanged from last week, and down from 2.69 percent a year ago. It was the only mortgage rate not to make a large increase.
“June’s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases, causing bond yields to rise and mortgage rates followed,” Nothaft said.
Speculation could ease due to additional details in the minutes of Fed’s policy meeting.
“The minutes of the Federal Reserve’s monetary policy committee meeting, released July 10th, stated that many members indicated further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of bond purchases,” Nothaft added.