Professional Home Staging and Photography Blog: May 2009

The Daily Mortgage Interest Rate Lock Advisory - May 7, 2009

What the Markets Are Doing Today:

The bond and mortgage backed securities markets opened in negative territory today while the stock markets opened in positive territory again today following the release of better expected economic news.

  • The Dow opened up 82 points from yesterday's close
  • NASDAQ opened up 15 points from yesterday's close
  • The 10 Year Treasury Bond opened down 6/32 from yesterday's close
  • FNMA 30 Year 4.0% coupon opened down 1/32 from yesterday's close

Remember, on MBSs, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. MBS closed up 5/32 from its opening yesterday but fell by as much as 10/32 this morning. MBS is currently down 5/32. I expect that mortgage rates be worse by 0.125 - .250 in discount points today.

Economic Reports Being Released Today:

  • 1st Quarter Productivity and Costs Data - Released by the Labor Department, this information helps us measure employee productivity in the workplace. The report revealed a 0.8% increase in worker output, which was slightly less than the 0.9% increase that was forecasted. Meanwhile, the Unit Labor Costs reading that showed a 3.3% increase which is higher than the 2.7% that was forecasted. This means that employer costs were higher than thought with no increase in productivity. This raises concerns for higher wage inflation and is, therefore considered bad news for bonds (lower prices and higher yields and mortgage rates).

  • Jobless Claims - 601,000 new claims for unemployment were filed last week, and is much less than the 635,000 new claims that were forecasted. However, continuing claims for unemployment continued to rise for the 14th straight week and jumped again to another record to 6.351 million. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  • Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $404 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Yesterday's 10-year Note sale was met with a decent demand from investors. That led to improvements in bonds and mortgage backed securities during afternoon trading yesterday. The Treasury will sell the 30-year Bonds today. Another round of strong demand could help bonds and mortgage backed securities regain some of this morning's losses. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Look for plenty of movement in the financial markets and mortgage rates this week. If the reports being released this week reveal weaker than expected economic conditions, the bond markets may rally and mortgage rates could fall.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. If you haven't locked in a rate yet, then you may want to continue floating. While floating continues to make sense right now, the ever increasing massive government debt could soon drive mortgage rates up. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

  • Lock if my closing was taking place within 7 days
  • Float if my closing was taking place within 8 and 30 days
  • Float if my closing was taking place between 31 and 60 days
  • Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

 

East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Comment balloon 0 commentsLew Corcoran, ASP® • May 07 2009 10:13AM
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