Mortgage Rates Down Again

All eyes on unemployment data heading into next week’s Fed meeting

By Inman News, Thursday, September 6, 2012

Mortgage rates eased for a second week in a row on mixed economic news, but could be poised for a rebound after the European Central Bank announced a new round of bond purchases today that undermined prices of U.S. Treasurys, pushing up yields.

Rates on 30-year fixed-rate mortgages averaged 3.55 percent with an average 0.7 point for the week ending Sept. 6, down from 3.59 percent last week and 4.12 percent a year ago, Freddie Mac said in releasing the results of its Primary Mortgage Market Survey. Rates on 30-year fixed-rate mortgages hit an all-time low in Freddie Mac records dating to 1971 of 3.49 percent during the week ending July 26.

For 15-year fixed-rate mortgages, rates averaged 2.86 percent with an average 0.6 point, unchanged from last week but down from 3.33 percent a year ago. Rates on 15-year fixed-rate mortgages hit a low in records dating to 1991 of 2.8 percent during the week ending July 26.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.75 percent with an average 0.7 point, down from 2.78 percent last week and 2.96 percent a year ago. Rates on five-year ARM loans hit a low in records dating to 2005 of 2.74 percent during the week ending July 26.

For one-year Treasury-indexed ARMs, rates averaged 2.61 percent with an average 0.4 point, down from 2.63 percent last week and 2.84 percent a year ago. That’s a new all-time low in records dating to 1984.

A separate survey by the Mortgage Bankers Association showed demand for purchase mortgages fell a seasonally adjusted 0.8 percent during the week ending Aug. 31 compared to the week before. Demand for purchase loans was up 1 percent from a year ago.

Like Treasurys, investors see mortgage-backed securities (MBS) guaranteed by the government as a safe haven during times of economic uncertainty. Demand for Treasurys and MBS pushes their prices up, and yields down.

Investors were placing their bets today on an economic recovery, boosting the share prices of many publicly traded companies, after the European Central Bank announced a round of unlimited purchases of government bonds issued by deeply indebted European governments.

The move also helped pushed down the price of bonds issued by more stable countries, such as the U.S. and Germany, Reuters reported.

The Federal Reserve is scheduled to meet next week to discuss whether to launch another round of “quantitative easing” that could include stepped-up MBS purchases. Some analysts think that decision could hinge largely on employment numbers the Bureau of Labor Statistics will release Friday.

Speaking at an economics symposium in Jackson Hole, Wyo., last week, Federal Reserve Chairman Ben Bernanke called stagnation of the labor market “a grave concern,” reiterating past promises that the Fed would “provide additional policy accommodation as needed.”

A report issued today by payrolls processor ADP showed private sector employment increased by a seasonally adjusted 201,000 from July to August, the first time since March employment gains have exceeded 200,000.

Private, nonfarm employment growth since 2001

For the week ending Sept. 1, initial claims for unemployment insurance totaled 365,000, down from 377,000 the week before and 411,000 at the same time a year ago, the Department of Labor reported.

Although there’s been some speculation that the Fed won’t take action before the election, former Fed members told CNN Money that Bernanke is unlikely to be swayed by political pressure from either party.