US mortgage rates fell unexpectedly on Wednesday, with most lenders reducing their rates by 0.125%. Those lenders that did not lower rates yesterday are expected to reduce their rates today if the bond market holds steady. Wednesday’s rate decreases largely reversed last week’s spike in rates.
Most underlying economic indicators were mixed on Wednesday, and they do not appear to be the impetus for the mortgage rate decline. Major stock markets increased slightly, the price of gold increased for the fourth straight day, the price of oil recorded another slight increase, and the yield on 10-year Treasury notes declined slightly.
The major economic news on Wednesday was the release of the Consumer Confidence Index for December by The Conference Board. The index declined from a revised 17-year high of 129.5 in November to 122.1. That number was much lower than the 128.1 rated expected by economists polled by Reuters. The unexpected magnitude of the decline in the Consumer Confidence Index might have been the impetus for lower mortgage rates.
The Conference Board’s Director of Economic Indicators, Lynn Franco, said in a statement that the Board attributed the decline in the Consumer Conference Index to consumers feeling less optimistic about employment opportunities and overall business prospects.
It is unclear whether Wednesday’s mortgage rate decline signals an end to the upward trend in mortgage rates that was seen last week. Year-end bond market trading can be volatile, and low trading volumes can lead to rate changes in the bond and mortgage markets that are not indicative of long-term trends.
The mortgage rate reaction to the decline in the Consumer Confidence Index may have been unwarranted. Although consumers appeared to be slightly less optimistic about employment opportunities and overall business conditions in December, the percentage of consumers who expected their income to rise during the next six months increased, as did the percentage who expected to purchase major appliances and new homes.
As stated in yesterday’s post, the trend in long-term mortgage rates may not become clear until the middle of January.
Use our mortgage calculator to determine how much you can afford to borrow, and do not forget that we offer a mortgage pre-approval facility.
Visit us online to receive a custom rate quote on one of our competitive home loans including Conforming Loans, Non-Conforming Loans, Government Loans, Portfolio Loans, Jumbo Loans or Super Jumbo Loans online or by calling us at 1.888.546.2634 to speak with a Mortgage Consultant today.