Bobby Darvish has been involved in the mortgage industry since 1998 He is a Certified Mortgage Planning Specialist from CMPS Institute, has studied residential mortgage & commercial mortgage underwriting courses, is a Business Finance Consultant graduate as well as a licensed broker.
Interest rates on U.S. 30-year mortgages rose to their highest levels in four months in line with rising Treasury yields on a bond market sell-off spurred by speculation about reduced stimulus from global central banks, mortgage finance agencyFreddie Macsaid on Thursday.
The average 30-year mortgage rate was 3.52% in the week ended Oct. 20, Freddie Mac said in its latest mortgage rate survey. This was the highest level since the 3.56% recorded in the week of June 23.
“This is the first week in over four months that rates have risen above 3.50%. This month, mortgage rates seem to be catching up to Treasury yields and returning to pre-Brexit levels,” Sean Becketti, Freddie Mac’s chief economist, said in a statement.
Benchmark 10-year Treasury yields were at 1.74% early on Thursday, down more than 1 basis point (a tenth of a percentage point) on the day. On Monday, it reached 1.81%, which was its highest since June 2,Reutersdata showed.
Boston Fed president sees unemployment rate dropping to 4.5% next year
Bloomberg News/Landov
Federal Reserve Bank of Boston President Eric Rosengren
The Federal Reserve may have
to be more aggressive in raising interest rates than the measured pace
it currently projects, Boston Fed President Eric Rosengren said on
Friday.
The Fed’s latest economic forecast sees interest rates a little above 1% by the end of next year and just under 2% in 2018.
“My
own view is that if the unemployment rate falls as much as I’m
expecting, then it is possible that we’ll have to raise rates faster
than the summary of economic projections,” Rosengren said in an
interview with CNBC.
The Boston Fed president was one of three
dissenters at the September Fed meeting, wanting the central bank to
lift interest rates by a quarter percentage point.
Rosengren said he thinks the unemployment rate will
drop to around 4.5% by next year. He said he was concerned this was
unsustainable, and may force the Fed to hike rates much more quickly
than he hoped would be needed.
The Boston Fed president said some
new research has cast doubt on whether disaffected workers will
continue to return to the labor force and keep the unemployment rate
from falling.
Traders have priced in a small chance that the Fed
will move at its next meeting on Nov. 1-2 given that it is six days from
the presidential election. At the same time, investors have priced in a
greater than 60% chance of a rate hike at the Fed’s December meeting,
when Fed Chairwoman Janet Yellen is scheduled to hold a press
conference.
“To me that seems quite appropriate,” Rosengren said
Friday. “We have tended to move around the time the Fed chair has a
press conference,” he added. Read:Fed hold rates steady for the time being
Rosengren
noted in the interview that his outlook for the pace of interest rate
hikes is also faster than the market has priced in.
He said he was concerned that the 10-year Treasury rate
TMUBMUSD10Y, -0.39%
and the commercial real estate
capitalization rate are at historic lows. The 10-year rate “is roughly
at where we think inflation is right now. It is quite a low rate,” he
said.
This low rate suggests investors have no confidence in the Fed’s ability to offset weak growth, the Boston Fed president said.
“So
the fact that long rates are so low, and that there are some sectors of
the economy that we’re starting to see very rapid asset growth—like
commercial real estate, is a source of concern as people start moving to
try to get higher returns because we’ve had low rates for a long period
of time,” he said.
The Fed could use its
balance sheet to steepen the yield curve if one was worried about
potential financial stability concerns from these low rates, he said.
“If
one were concerned about the historically low 10-year Treasury and
commercial real estate capitalization rates, perhaps because of
potential financial stability concerns, the balance sheet composition
could be adjusted to steepen the yield curve,” he said.
This
suggests that Rosengren is in favor of using the balance sheet as a tool
for policy, either buying or selling securities to raise long-term
rates.
The Boston Fed president did not elaborate on his comment.
Most Fed officials have come out in active use of the $4 trillion
balance sheet. They have supported a plan to gradually let the balance
sheet shrink but not until short-term interest rates are about 1% and
the expansion is on firmer ground.
In her recent speech on the
Fed’s policy tools in Jackson Hole, Yellen said uncertainty and
potential costs caused the Fed to decide against using the balance sheet
Bloomberg News/Landov
