Article Archive Article PDF

Mortgage Rates Stay Close to Unchanged

For a week that was supposed to be slow and low-volume, there was a lot of activity in the bond markets. Traders took profits after what turned out to be a better-than-expected year. Selling of short-term issues was the heaviest because they are more vulnerable to interest-rate increases, which are sure to come. But that money moved into longer-term notes, such as the benchmark 10-year, allowing yields, which move in the opposite direction of prices, to remain steady. Many economic reports performed outside expectations, but traders appeared unfazed, preferring to square their positions prior to the end of the year. The steadiness in the bond market allowed lenders to hold most mortgage rates close to last week's levels. The week began on a positive note with the November index of leading indicators, which looks at the economy three to six months down the road, rising for the first time in six months. The final revision to the third-quarter GDP also rose, coming in at 4 percent even. Inside the report there was more good news: consumer spending was up by a strong 5.1 percent, and business spending climbed 13 percent, yet inflation came in at an acceptable 0.9 percent level. First-time claims for the week ended December 17 rose by 17,000 to 333,000, but this followed a week that saw claims plunge by 43,000. Durable goods orders for November made their best showing in four months, rising 1.6 percent and business investment was up 8.1 percent -- the strongest increase since July. Personal income and outlays for November came in near forecasts, but new home sales took a dive, plunging 12 percent to an annual rate of 1.125 million units. With mortgage rates holding at low levels, refinancing increased for the week ended December 17. According to the Mortgage Bankers Association, applications to refinance rose 5.7 percent and accounted for almost 49 percent of mortgage transactions. Applications to purchase fell 3.6 percent. Rates crept up on a few mortgage products and down on others, but moves were minimal. The 30-year fixed-rate mortgage (based on zero discount points) remains below 5.5 percent, but the 15-year fixed-rate edged back up near 5 percent. The introductory rate on the volatile one-year adjustable-rate mortgage is closing in on 3.5 percent.

The last week of the year should be slow on the trading side, and it will be definitely light on economic news. The first report doesn't come until Tuesday, when the Conference Board releases the consumer confidence index for December. Over the past year this has lost some of its market-moving ability. On Wednesday existing home sales will be released along with the Chicago PMI index on manufacturing conditions, which is often a precursor to the ISM report due on January 3. First-time claims are also due. Because of the holidays it is unlikely the markets will move much, and this should keep mortgage rates close to present levels.