It's all over the news; the benchmark mortgage rate continues to fall. Each week Fannie and Freddie report the prior week's average. Yesterday Freddie reported the average 30-year fixed rate at 5.01% with an average of 0.6% in discount points for the week. Keep in mind that rates fluctuate constantly, minute by minute, throughout the week. This is the lowest average since Freddie Mac started tracking in 1971.
This trend of mortgage rates moving lower is due to the Federal Reserve's purchasing of Mortgage Backed Securities (MBS). They have committed to purchase $500 billion between Jan 5 and June of this year. Each Thursday they will report their progress. The Fed announced yesterday afternoon that over the past week, they bought $10.2B of Fannie Mae, Freddie Mac and Ginnie Mae Mortgage Backed Securities, and the increased buying demand has kept Bond prices moving in a sideways to slightly higher pattern this week. With 120 trading days between now and June, it would appear they will be buying about $4 billion per day.
This morning the Labor Department reported 524,000 jobs lost during the month of December driving the unemployment rate up to 7.2%. This is the highest reading in 16 years. Typically, Bonds would react favorably to this news however this morning Bonds fell on the news. It seems they were expecting the number to be far worse than reported.
While the overall trend has an upward bias, mortgage bonds are currently moving sideways battling a touch ceiling of resistance. Keep in mind we are at historic highs in the market - so while rates may improve some more over time, we could experience a pull back in the days to come.
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