Weekly Mortgage Market Update: What Drove Lending Conditions This Week in Raleigh, NC
Current mortgage rates faced renewed pressure this week amid choppy trading in mortgage-backed securities, driven by mixed economic data, heavy Treasury supply, and fresh political headlines. After markets reopened from the Martin Luther King Jr. Day holiday, investors quickly had to digest labor data, housing reports, GDP revisions, and inflation measures. The result was a week where mortgage rates moved modestly higher, even as demand for mortgages surged.
For borrowers across Raleigh and the Triangle, this week reinforced how sensitive mortgage pricing remains to both economic fundamentals and policy developments.
Holiday Start and Labor Data Set the Tone
Markets reopened on Tuesday following the holiday with an immediate focus on employment. ADP reported just 8,000 private-sector jobs added, a noticeable slowdown from prior weeks. While ADP often has a limited impact on its own, it contributed to a broader narrative of cooling labor growth.
Mortgage-backed securities initially found support from the softer labor signal. Lower job growth reduces upward pressure on wages and inflation, which is typically supportive for bonds. That support proved short-lived as other data later in the week pointed to economic resilience.
Mortgage Demand Surges as Rates Stay Near Recent Lows
Wednesday brought one of the most important developments of the week for housing finance. MBA data showed a sharp jump in mortgage activity. The Mortgage Market Index climbed to 397.2, its highest level in several years. Purchase applications rose to 194.1, while refinance activity surged to 1,580.8.
This increase confirms how sensitive borrowers remain to rate movements. Even small improvements in pricing can unlock significant demand. Strong application volume provided technical support for mortgage-backed securities, helping limit how much mortgage rates rose despite broader bond market pressure.
Housing and Construction Data Disappoint
Also on Wednesday, housing data shifted the tone. Pending home sales for December fell 9.3 percent, far worse than expectations. This sharp decline highlighted affordability challenges and uncertainty among buyers. Weak pending sales tend to support bonds because they signal slower housing momentum.
Construction spending data was mixed. September spending was revised lower, while October showed a modest rebound. The mixed results failed to provide a clear directional signal for rates. Investors largely looked past the data and focused on bigger macro drivers.
A 20-year Treasury auction added supply pressure later in the day. Treasury issuance remains a consistent headwind for bonds, and this auction contributed to mild weakness in mortgage-backed securities.
GDP and Inflation Reports Shift Market Focus
Thursday delivered the heaviest data load of the week. GDP revisions showed the U.S. economy growing at a 4.4 percent pace in the third quarter, slightly stronger than expected. Final sales remained robust at 4.5 percent. Strong growth data tends to pressure bonds because it reduces the urgency for rate relief.
Inflation data told a more balanced story. Core PCE for October and November held at 0.2 percent month-over-month. Year-over-year core PCE came in at 2.8 percent for November, slightly higher than in October. These readings suggest inflation progress continues, but at a slow pace.
Because PCE is the Federal Reserve’s preferred inflation gauge, these reports mattered for rate expectations. They were not hot enough to trigger a selloff, but not cool enough to spark a rally in mortgage-backed securities.
Jobless claims helped offset some of the growth pressure. Initial claims fell to 200,000, while continued claims dropped to 1.85 million. The labor market remains tight, which limited bond gains and kept upward pressure on mortgage rates.
Political Headlines and Treasury Activity Add Volatility
Midweek also included a speech from President Trump that markets monitored closely. While no immediate policy action was announced, recent rhetoric around fiscal policy and government spending continues to influence long-term rate expectations. Political uncertainty often increases volatility in Treasury and MBS markets, especially when paired with heavy issuance.
The NY Fed also conducted additional bill purchases, providing some liquidity support. However, these purchases focus on short-term funding markets and do little to directly support long-duration mortgage bonds.
A 10-year Treasury auction on Thursday added further pressure. Weak demand for longer-dated Treasuries typically spills over into mortgage pricing because MBS compete for the same investor dollars.
PMI Data and Consumer Sentiment Close the Week
Friday’s data leaned slightly rate-friendly but failed to reverse the week’s trend. S&P Global PMI reports showed steady but unspectacular growth in manufacturing and services. The composite PMI held near recent levels, signaling continued expansion without acceleration.
Consumer sentiment improved to 56.4, beating expectations. Importantly, inflation expectations declined. One-year inflation expectations dropped to 4.0 percent, while five-year expectations eased to 3.3 percent. Lower inflation expectations help cap long-term rates, but the improvement was not large enough to drive a meaningful rally in mortgage-backed securities.
Mortgage rates finished the week modestly higher, though still well below levels seen late last year.
Why Mortgage Rates Moved This Week
Several forces worked together to influence mortgage pricing this week, and none operated in isolation.
- Stronger GDP readings reinforced the idea that the economy continues to grow at a healthy pace. Solid final sales and upward revisions reduced the urgency for lower long-term yields. When growth looks durable, investors demand higher compensation to hold longer-duration bonds, which pressured mortgage-backed securities.
- Treasury auctions added another layer of pressure. Increased issuance across intermediate and long maturities forced the market to absorb more supply. When demand does not fully offset that supply, yields rise. Mortgage-backed securities compete directly with Treasuries for investor capital, so higher Treasury yields translate quickly into higher mortgage pricing.
- Labor data sent mixed signals. Job growth slowed and hiring momentum cooled, but claims data and participation trends showed the labor market remains tight. This combination kept wage pressure in play and limited how much bond markets could rally. Cooling growth helped MBS at the margin. Ongoing tightness prevented a meaningful move lower in rates.
- Mortgage demand surged as borrowers responded to recent rate improvements. Purchase and refinance activity both climbed sharply. Strong application volume improved MBS performance relative to Treasuries by tightening spreads. That demand helped insulate mortgage pricing from larger losses even as broader bond markets weakened.
- Inflation data confirmed gradual progress rather than a decisive shift. Core PCE readings stayed consistent month over month and year over year. Inflation continues to move in the right direction, but at a measured pace. That kept markets cautious and prevented a strong rate rally.
Taken together, these forces produced upward pressure on mortgage rates, but not enough to trigger a breakout. Pricing moved higher on balance while remaining contained within a familiar range.
Reports to Watch Next Week and Potential Impacts
Next week’s calendar includes several reports and events that could influence mortgage-backed securities and mortgage rates.
Durable goods and core capital expenditures will offer insight into business investment. Strong readings could push yields higher. Weak results would support bonds.
Home price data from Case-Shiller and FHFA will shape housing inflation expectations. Slower price growth would be rate-friendly.
Consumer confidence remains important as spending drives economic growth.
Treasury auctions for 2-year, 5-year, 7-year, and 10-year notes will be closely watched. Demand at these auctions often dictates the direction of short-term interest rates.
The Federal Reserve rate decision and press conference on Wednesday will be the central event. While no rate change is expected, markets will parse the statement and commentary for clues about future policy.
What This Means for Raleigh and Triangle Borrowers
For homebuyers and homeowners across Raleigh, Cary, Apex, Durham, and Wake Forest, the key takeaway is stability with volatility. Mortgage rates remain attractive relative to recent history, but daily swings are likely as markets respond to data and policy signals.
Strong mortgage demand shows borrowers are ready to act when pricing improves. Strategy and timing matter more than headlines.
Certified Home Loans helps clients across the Triangle navigate changing market conditions with clear guidance and local expertise. Whether you are considering a Conventional, FHA, VA, or Jumbo mortgage, our Raleigh Mortgage Team focuses on execution, communication, and long-term outcomes as current mortgage rates continue to evolve.
