The Bridgewaters, Massachusetts

Mortgage Commentary

Mortgage rates dipped last week to a two month low. But we'll likely see them bounce back up in response. Additionally, there is no indication they will go down any further. Inflation is the key driver here, despite the weak economy, and it's not letting up as the summer gets into full swing. I recommend getting a rate locked now, as they are still historically low.

When the stock markets lose triple digits and mortgage bonds don't blink, it's a pretty good sign we have greater odds for less bond demand - and higher rates. Still, there's no indication that rates are breaking out of the channel they've been trading in for weeks.

It is strange to say, but we should be cheering the lousy growth pattern. If the economy was moving upward, the additional demand would push inflation and interest rates higher. At present, all we can hope for is that the economy breaks inflation before inflation completely breaks the economy.

While overall mortgage interest rates managed a little improvement last week, surprisingly. However, rates have more or less been generally flat for weeks, and that stability is a welcome stance in a weary market. There's not much likelihood of a huge movement this week, but we may see rates rise a couple of basis points or so.

The Conference Board started this week's economic releases with their Consumer Confidence Index (CCI) May. It showed a weaker than expected level of confidence with a reading of 57.2 when it was forecasted to stand at 60.0. This was the lowest reading in 16 years, indicating that consumers are not very optimistic about their personal financial situations. This is considered good news for bonds and mortgage rates because it usually means consumers are less likely to make large purchases in the near future.

April's New Home Sales data was also released today, revealing a higher level of sales than was expected. However, today's report also revised March's sales downward. This means that sales were weaker than thought in March, but the month to month increase was fairly large. This is bad news for bonds because a weak housing sector usually translates into weaker economic conditions in general.

Tomorrow morning we will see April's Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 1.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.

Current Rates*:

• 30 Year Fixed - 6.25% with Zero Points
• Jumbo 30 Year Fixed - 7.75% with .5 Points
• 15 Year Fixed - 5.875% with Zero Points
• FHA /VA 30 Year Fixed - 6.25% with Zero Points
  
  *Rates and fees accurate as of 5/23/08. Rates and fees subject to change without notice.  This is not an advertisement for the purposes of the Truth-in-Lending Act or Regulation-Z. Terms and conditions apply. For qualified borrowers. Not a promise to lend.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Anyone who has ever had an FHA insured mortgage may be due a refund on part of the mortgage's insurance premium or a share of the earnings.

You may be eligible for a refund of a portion of the insurance premium from HUD/FHA if you:

• acquired your loan AFTER September 1, 1983 
• paid an upfront mortgage insurance premium at closing AND 
• did NOT default on your mortgage payments.

To find out if HUD owes you a refund, simply visit HUD's web page at: http://www.hud.gov/offices/hsg/comp/refunds/index.cfm 

Simply follow the directions to search for your name or FHA case number. If your name is on the list, call 1-800-697-6967 to make arrangements for getting your full refund, free of charge. If you name was not found on the list, but you think you are due a refund, call the same toll-free number to find out.

Mortgage Commentary

Mortgage interest rates ticked slightly higher last week, and we will likely see the same this week. Not much economic news is due out this week, and that which is will likely put inflationary pressures on the market, pushing rates even higher.

In the present environment, it's hard to find any one element of the economy to get enthused about. Most sectors are stumbling along, at best, or continuing to decline. Troubling news seems to be found around virtually every corner, and prospects for a sharp uptick seem limited at the moment.

Rising borrowing costs undermine the rates borrowers will pay. Two issues to monitor: 1) LIBOR reform where U.S. banks have potentially understated their borrowing costs. If this is restated, expect LIBOR to play catch-up, resulting in higher rates, and 2) Liquidity, which the Fed is focused on infusing more and more of. However, less or even low access to liquidity equals higher rates.

Underlying interest rates had been moving higher last week, but were short-circuited by weaker economic news. The overall average for 30-year fixed rate mortgages climbed by three basis points last week as HSH's Fixed-Rate Mortgage Indicator (FRMI) closed the nation's leading survey of mortgage prices at 6.56%. The overall average for Hybrid 5/1 ARMs remained unchanged at 6.16%.

Thirty-year jumbo mortgage rates also remained unchanged last week, so the FRMI's slight increase came from the true conforming loans where the average ticked seven basis points higher to 6.10%. Increases were also noted in the prices of the new "expanded conforming" fixed rates, which moved a tenth of a percent higher.

Inflation is rearing its ugly head. Import prices were up more than 15 percent year-over-year in April, the biggest increase on record. Goldman Sachs is forecasting oil prices averaging $141/bbl this summer, and that is some 10% higher than presently uncomfortable levels. Should that be the case, a more pronounced economic slowdown would likely occur, as even more disposable dollars would be vacuumed from pocketbooks. As we're presently holding a sub 1% GDP growth rate, that would more than likely push us into the red, so here's hoping Goldman Sachs is wrong in their estimation.

This week brings us the release of only three pieces of economic news in addition to the minutes from the last FOMC meeting. Only one of those three can be considered of high importance to the markets and mortgage rates, so we may see a fairly calm week for mortgage rates. If rates do move anywhere in the present climate, it would be upward, but probably not by much. We added three basis points to the FRMI last week, and would expect about the same for this week.

Overall, it may be an interesting week for mortgage rates. We could see little movement in rates if the stock markets remain calm and the week's data doesn't reveal any major surprises. Tuesday's PPI report is the single most important data of the week, but the FOMC minutes may also lead to some volatility in the markets. Also worth noting is an early close in the bond market Friday afternoon ahead of the Memorial Day Holiday Monday. These early closes sometimes lead to additional volatility in bond prices as investors prepare for the long weekend, and trading thins with many traders starting the weekend early.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.

Current Rates*:

• 30 Year Fixed - 6.125% with Zero Points
• Jumbo 30 Year Fixed - 7.50% with .5 Points
• 15 Year Fixed - 5.625% with Zero Points
• FHA /VA 30 Year Fixed - 6.125% with Zero Points
  
  *Rates and fees accurate as of 5/16/08. Rates and fees subject to change without notice.  This is not an advertisement for the purposes of the Truth-in-Lending Act or Regulation-Z. Terms and conditions apply. For qualified borrowers. Not a promise to lend.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Looking Back

Interest rates ended up moderately after what had looked like a good week.  Stronger than expected Housing Starts (+8.2% in April) erased all the gains from earlier in the week.

In other news, the price of single-family homes dropped 7.7% nationwide in the first quarter of ‘08. This was the largest year to year drop since the NAR started compiling statistics in 2002.

The median sales price for a single-family home fell to $196,300, down 4.8% from the last three months of 2007.  This data is skewed somewhat by high end homes that are suffering from higher rates for jumbo mortgages (above $417,000).

In contrast to the rest of the country, the Northeast region actually saw a rise in the average sales price (+3.2%).

Looking Forward

The coming week features only two important economic releases relating to the housing sector.  The Producer Price Index, on Tuesday, will give us a glimpse into the future of inflation.  Also, on Friday, Existing Home Sales will be anticipated.

How Does a Weak Dollar Influence Interest Rates?

The US dollar is one of the leading economic commodities in the world.  Foreign investors purchase dollars to buy US goods and services, as well as assets such as mortgage and treasury backed securities.  When the dollar is strong, its value rises in relation to other major currencies.  Prices of foreign goods and services drop for US consumers.  While US consumers benefit from this through cheaper foreign goods, it has the reverse effect on American exports, which become more expensive overseas.

Many analysts believe that the Fed is letting the dollar fall to help trade balances by making US goods more affordable around the world. A strong dollar makes it inviting for foreign investors to put their money into mortgage bonds, which keeps rates low. 

Mortgage Commentary

We saw rates shed a few basis points last week. We don't expect that to continue, especially with oil prices rising along with inflation concerns. Inflation concerns - what with oil trading at $120 a barrel - appear to be behind the pressure.

Try as they might, mortgage bonds are having a hard time offering us lower rates. With the economic news mostly stable and price pressure fresh in everyone's mind, there's little reason to expect any sort of strong downturn for mortgage rates anytime soon. In fact, some slight upward pressure is in place at the moment, and a slew of new data is out this week covering Retail Sales, inflation, Industrial Production and Housing.

Monday's bond market has opened up slightly despite early stock gains. The stock markets are kicking the week off in positive territory with the Dow up 75 points and the Nasdaq up 19 points. The bond market is currently up 6/32, but we will likely see a slight increase in rates as a result of weakness late Friday.

Wednesday's only relevant report is April's Consumer Price Index (CPI). It is similar to next week's PPI report, but measures inflationary pressures at the more important consumer level of the economy. Its results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing. We could see inflation concerns take an even stronger role in mortgage rates, and that could push them higher.

Overall, it likely will be a moderately active week for mortgage rates. Besides the week's important economic news, look for the stock markets to be a major influence on trading. I suspect we will see a fair amount of volatility in stocks, which should affect bond prices. Significant stock weakness should translate into bond gains and lower mortgage rates. However, if the major stock indexes rally, we could see mortgage rates move higher as a result.

If you're looking to refinance into a fixed rate loan, you might want to act soon. This week will have a few pieces of economic data that could push rates higher.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.

Current Rates*: 

• 30 Year Fixed - 6.125% with Zero Points
• Jumbo 30 Year Fixed - 7.50% with .5 Points
• 15 Year Fixed - 5.625% with Zero Points
• FHA /VA 30 Year Fixed - 6.125% with Zero Points
  
  *Rates and fees accurate as of 5/9/08. Rates and fees subject to change without notice. This is not an advertisement for the purposes of the Truth-in-Lending Act or Regulation-Z. Terms and conditions apply.  For qualified borrowers. Not a promise to lend.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Looking Back

The swelling tides of higher mortgage interest rates started to recede last week as investors waded back into the waters.

Fannie Mae reported a $2.2 Billion loss for the first quarter, and issued a warning of a "severe weakness" in the housing market.  They also predicted a 7-9% nationwide drop in home prices. Fannie CEO Daniel Mudd told investors "right now we are in the belly of the cycle." 

Looking Forward

Economists for the National Association of Realtors are predicting flat home sale numbers during the next few months with a chance for a pickup over the summer, depending on the availability of affordable home loans. 

There is an abundance of economic data on the plate this week as analysts search for signs of how long and how deep this recession will spread. 

Are Lenders Keeping Rate Cuts For Themselves?

The Fed has lowered the fed funds rate from 5.25% last September, to 2% last week, yet interest rates are only moderately lower than 9 months ago. How come?

According to a recent Fed survey, "about 70 percent of banks (lenders) - up from 45 percent in the January survey - indicated that they had increased spreads of loan rates over their cost of funds."  This means many lenders are trying to refill their coffers after taking recent financial beatings.

To be fair, there are many factors that go into pricing rates, and the Fed funds rate is but one factor. 

Mortgage Commentary

Rates ticked down slightly last week.  As a reaction, we expect rates to tick back up.  Inflation concerns still permeate the economy, especially as summer approaches and energy and food prices skyrocket.  To ensure adequate returns on investment, mortgage investors will demand higher rates. 

This week is very light in terms of economic releases scheduled to be posted.  There are actually three reports scheduled that are worthy of addressing, but none of them are considered to be highly important to bonds and mortgage rates.

In addition to this week's economic data, we also have Treasury auctions that can influence bond trading and affect mortgage rates. The Treasury will hold a 10 year Note sale Wednesday, and 30 Year Bond sale Thursday. Results of the auctions will be posted at 1:30 PM ET. If they were met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding could lead to higher mortgage pricing those afternoons.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.