The Mortgage Interest Rate Lock Advisory for August 13, 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 7/32 this morning to 99.00.
The price of the FNMA 30-Year 4.5% MBS coupon closed down 15/32 yesterday to 99.22 (as shown by the white line). MBS initially opened down this morning, but reversed course on the retails sales and jobless claims reports. MBS is currently trading up 7/32 at 99.44 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and mortgage interest rates come down with it. I expect that mortgage interest rates will be 0% - 0.25% better in price this morning as compared to yesterday.
Economic Report Affecting Mortgage Interest Rates Today:
- Retail Sales Data for July - There was a 0.1% decrease in retail sales in July, mush weaker than expected, and much less than 0.8% increase analysts expected. When automobile sales are excluded, retail sales fell 0.6%, and is much less than the 0.1% increase that was expected. In the previous month, we saw a revised 0.8% increase in retail sales, and a revised 0.5% increase when automobiles were excluded. This data is very important to the financial markets and mortgage interest rates because it helps us measure consumer spending. Because consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase in retails sales indicates that consumers are spending less than thought, and could lead to a slow economic recovery. This in turn would ease immediate concerns about inflation. This morning's report had a positive affect on the mortgage market, which in turn will lead to lower mortgage interest rates this morning.
- Jobless Claims - There were 558,000 new claims for unemployment last week, 15,000 more than analysts had predicted. Continuing claims for unemployment, however, fell sharply last week to 6.202 million. This still indicates that it's still taking time for the jobless to find work. With no signs of job creations, it would appear that many are exhausting their unemployment benefits. With the high rate of people unemployed, the threat of wage based inflation remains 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. This data usually is not considered to be of high importance to the mortgage market. However, this morning's report coupled with the retail sales report also had a positive affect on the mortgage market. This will lead to lower mortgage interest rates this morning.
- 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 $721 billion in MBSs this year. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
News and Events That Could Affect Mortgage Interest Rates Today:
Demand for the 10-Year Notes was fair yesterday. The results of today's 30-Year Note auction will be posted at 1 PM EST this afternoon. If the auction is met with a strong demand from investors, it could have a positive effect on the mortgage market. We can that expect prices of bonds and mortgage backed securities to move higher which in turn will lead to lower yields and lower mortgage interest rates. But, if the auction is met with a lackluster interest from investors, then the prices of bonds and mortgage backed securities may move lower which in turn will lead to higher yields and higher mortgage interest rates.
In other news, the FOMC ended its two day meeting yesterday with a statement release. As expected, there are no changes in the key interest rates. However, the Fed did announce that it will end its purchase of up to $300 billion in U.S. Treasuries by the end of October in an orderly fashion. The mortgage markets initially reacted negatively to the results of the 10-Year Notes auction and to the FOMC statement which helped forced mortgage interest rates to go up yesterday afternoon.
There are a number of events and economic reports scheduled for release this week that could affect mortgage interest rates. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog.
What's Happening With Mortgage Interest Rates Today:
Moderate to High Volatility. Overall, look for the most movement in bond prices and mortgage interest rates today and tomorrow. If you're still floating your rate, please act accordingly and maintain contact with your mortgage professional.
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 last week has proven, it's becoming increasingly unlikely. The apparent theme indicates the recession is over (or at least has hit bottom), and markets are reacting accordingly.
You can expect mortgage interest rates to generally move higher in the coming weeks and months. The primary reasons are 1) the recession appears to be bottoming out; 2) the housing market, while still declining, appears to be stabilizing; 3) the jobless rate is 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