Mortgage Rate Forecast for May 28, 2010
Here are some of the events affecting mortgage rates today:
What Mortgage Backed Securities Are Doing Today:
- The price of the FNMA 30-Year 4.5% MBS coupon opened at 101.72 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.5% MBS coupon was trading at 101.94 - up 7/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and so do mortgage rates. I expect that mortgage rates will be up to 0.250 points better in price this morning as compared to yesterday afternoon.
Price Trend in Mortgage Backed Securities:
The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days from 4-28-2010 to 5-28-2010:
Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:
- Personal Income and Outlays Report - there was a 0.4% increase in personal income in April. This follows a gain of a gain of 0.3% in March and a 0.1% gain in February. Year-over-year, personal income is up 2.5%. While income is up, consumer spending was flat in April, indicating people are holding onto their money. Year-over-year, consumer spending is down 4.6%. Inflation is still almost nonexistent as the core Personal Consumption Expenditures (PCE) index is up only 0.1%, the same as in March.
This report provides us with a measurement of the consumer's ability to spend and their current spending habits. Because consumer spending makes up two-thirds of the U.S. economy, any related data usually has an impact on the mortgage market and mortgage rates. This report had no impact on mortgage rates this morning.
- The Revised University of Michigan Index of Consumer Sentiment - came in at 73.6, better than the 73.3 reading analysts were expecting, and better than the 72.2 reading the previous month. An increase in consumer confidence indicates that consumers may be more apt to make large purchases in the near future. However, consumer sentiment report usually does not have much of an impact on the mortgage market or mortgage interest rates.
In other news, prices of bonds and mortgage backed securities fell significantly yesterday which led to higher mortgage rates as the stock market rallied on comments from China that it would continue investing in Europe.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past year:
Mortgage Rate Lock Advice:
Prices of mortgage backed securities are no longer at their highs of 2010. Yesterday, the price of the FNMA 30-Year 4.5% Coupon fell 59 basis points and closed within 97 basis points of its all-time high of 102.69 which was on November 30, 2009. This morning, the MBS coupon was within 78 basis points of that all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.875% with no points yesterday, and if price of the MBS 4.5% coupon were to go as high as 102.69, then the best the 30 year fixed mortgage rate would be is 4.75% with 0.25 point today.
If I were applying for a mortgage today, I would lock the rate as mortgage rates were already at their lows for 2010, and they're now rising. While it's still possible that mortgage rates could go lower again with the ongoing economic crisis in Europe, it won't be by much, and I would not risk the chance waiting for it.
Be sure to check out today's mortgage rates.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB