Mortgage rates should be firming given that the tenor of the spring economic reports has been much stronger than the reports released this past winter. However, mortgage rates are still finding room to fall.
Even the surprisingly upbeat unemployment report on Friday–a report that usually has a direct impact on mortgage rates–failed to push mortgage rates higher.
Why aren't mortgage rates rising?
Certainly, homebuyers and refinancing homeowners aren't questioning the lower mortgage rates, but it just doesn't seem to make much sense that when the economy is showing more consistent signs of improvement that mortgage rates would continue to fall.
"Global issues of course continue to play a role as a slower expansion in China and the ongoing Ukraine drama have seen investors interested in parking more of their funds in Treasuries, and it also may be that sky-high stock market is seeing some folks employing the old "sell in May and go away" strategy," said Keith Gumbinger, vice president of HSH.com, in the latest Market Trends newsletter.
"We cannot help a sneaking suspicion that without some regular upward trend for rates that pressure is building, making a pop higher in rates more likely than a more muted progression at some point."
Current mortgage rates
For the time being, mortgage rates continued their downward trend last week:
- 30-year: The overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) declined by 0.04 percent to fall back to 4.38 percent.
- 15-year: The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) eased by 0.03 percent, dipping to 3.58 percent for the week ending May 2.
- FHA: FHA-backed 30-year fixed-rate mortgages declined by just 0.01 percent, falling to 4.09 percent for the week.
- ARMs: Overall 5/1 Hybrid ARMs ticked lower by 0.01 percent to end the week at an average of 3.12 percent.
Are mortgage rates poised to pop?
"A growing economy despite a less-accommodative Fed (or, inversely, a less-accommodative Fed because of a growing economy) should be a key for firming interest rates," said Gumbinger. "There remain no indications that any spike in mortgage rates is imminent, but without regular, small increases, it does seem to us that some pressure may be forming, and a rise in mortgage rates expressed in rapid fashion could occur at some point."
Where mortgage rates are headed
For the last six months or so, mortgage rates have been holding steady inside a range of 4.21 percent (November 2013) to 4.63 percent (January 2014). While HSH.com doesn't expect we will break out of that range, mortgage-rate shoppers should expect interest rates to move more toward the upper end of that range if things continue on their current path.
"We can't help but think that there will be at least some move upward from last week's slew of data, but we appear most likely to hold pretty steady again," concluded Gumbinger.
This article Mortgage Rates Fall Despite Employment Report originally appeared on The HSH Blog.
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