The Mortgage Interest Rate Lock Advisory for August 28, 2009
Here are some of the events affecting mortgage interest rates today in Massachusetts, Maine, and New Hampshire.
What the Mortgage Backed Securities Market is Doing Today:
The price of the FNMA 30-Year 4.5% MBS coupon opened down 3/32 this morning to 100.02.
The price of the FNMA 30-Year 4.5% MBS coupon closed down 6/32 from its close yesterday 100.13 (as shown by the white line). MBS was down most of the morning, but is now trading up 1/32 at 100.16 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage interest rates. I expect that mortgage interest rates will be 0.125% - 0.25% worse in price this morning as compared to yesterday, but may improve this afternoon.
Economic Reports Affecting Mortgage Interest Rates Today:
- Personal Income and Outlays Report for July - The revealed that personal income was unchanged from July. Analysts expected an increase of 0.1%. The core price index was also flat in July. Spending increased only 0.2% from the previous month, a little less than the 0.3% increase that was expected. Personal income is down 2.4% year-to-year while spending is up 1.1% in the same period. The report measures income and the consumer's ability to spend as well as their current spending habits. Today's report also reveals that inflation is not yet a concern. As the numbers came in less than expected, it would normally lead to higher prices of mortgage backed securities which in turn leads to lower mortgage interest rates. However, it appears that the Personal Income and Outlays Report had a negative impact on the mortgage market today (lower prices and higher yields and mortgage interest rates).
- August Revision to the University of Michigan's Index of Consumer Sentiment - The index revealed a reading of 65.7, better than analysts expectations of a 64.0 reading, and is an increase from the 63.2 reading in July. This indicates that consumers are more optimistic about their personal financial situations than previously thought. Normally, that would lead to lower prices of mortgage backed securities and higher mortgage interest rates. Instead, the inverse happened - the report led to higher prices and lower mortgage interest rates this morning. Go figure.
News and Events That Could Affect Mortgage Interest Rates Today:
There are several important economic reports as well as the minutes from the last Federal Open Market Committee scheduled for release next week that could have an impact on the mortgage market. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog on Monday.
What's Happening With Mortgage Interest Rates Today:
Moderate to High Volatility. If you're waiting and hoping the 30 year fixed mortgage interest rate will dip below 5.0% (at no points) again, I want you to know that, while not impossible, and as the past several weeks have proven, it's becoming increasingly unlikely. It appears that the 5.0% mark is about as low as it will go. The apparent theme indicates the recession is over (or at least has hit bottom), and markets are reacting accordingly.
It also appears that mortgage interest rates are stabilizing right around the 5.0% - 5.25% mark as investors begin to realize the recession is not quite over yet. However, you can expect mortgage interest rates to generally move higher in the coming weeks and months. The primary reasons are 1) the recession, while not over, appears to be bottoming out; 2) the housing market, while still declining in some areas, appears to be stabilizing; 3) the rate of job loss has stabilized and may be slowing; and 4) corporate earnings reports show that companies are beginning to earn bigger profits.
So, ask yourself this question: "Will it hurt me more to lock in now and watch rates drop another eighth or a quarter point, or will it hurt me more to keep floating and watch mortgage interest rates turn for the worse?" If you're refinancing and have tired of the roller coaster ride, then I suggest you consider locking in now and being done with it. If you're willing to take the risk and continue watching mortgage interest rates, then keep a wary eye on the markets and maintain contact with your mortgage professional, because the markets can change at any moment.
My Mortgage Interest Rate Lock Advice for Today:
If I were considering financing/refinancing a home, I would...
- Lock if my closing was taking place within the next 7 days
- Lock if my closing was taking place between 8 and 30 days
- Float if my closing was taking place between 31 and 45 days
- Float if my closing was taking place between 46 and 60 days
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 interest rates for Massachusetts, Maine and New Hampshire at www.LewCorcoran.com/RateSheet.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB