Mortgage Rate Forecast: June 2010

Mortgage Rate Forecast for June 29, 2010

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities (MBS) Are Doing Today:

• The price of the FNMA 30-Year 4.0% MBS coupon opened at 101.28 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 101.28 - the same as 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 the same in price this morning as compared to yesterday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 5-30-2010 to 6-29-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Consumer Confidence Index (CCI) - consumer confidence for June fell 19.6% to 52.9 - and is much worse than the 63.3 reading that was expected. The previous readings were 63.3 in May, 57.9 in April, and 52.5 in March. The weakness is attributed mostly to the massive oil spill in the Gulf of Mexico. Posted by the Conference Board, this measures consumer willingness to spend. As a comparison, a reading of 80 or better is considered a signal of economic health. Retail sales typically move in tandem with consumer optimism. Because consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market traders and can have a significant influence on the mortgage market. If consumers are less confident in their personal financial situations, they are less likely to make large purchases. Despite the lower CCI readings, this report had no impact on mortgage rates this morning.

In other news, the S&P Case-Shiller Home Price Index  rose 0.7% in April, reflecting an increase in home price as homebuyer took advantage of tax incentives. On a year-on-year basis, home prices have increased an average 4.6% nationwide. While encouraging, we do expect to see an increase in foreclosures and distressed home sales this year. That coupled with the ending of the homebuyer tax credit program at the end of this month could lead to continuing declines in home values soon.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates are at historic lows - they have not been this low since 1953 - and could possibly go even lower as the global economic crisis continues. However, the US is continuing on its deficit spending spree, and is adding to its massive debt. This is causing consternation among the other members of the G8. As such, I would not risk the chance waiting for lower mortgage rates.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Mortgage Rate Forecast for June 28, 2010

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities (MBS) Are Doing Today:

• The price of the FNMA 30-Year 4.0% MBS coupon opened at 100.78 this morning - the same as Friday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 101.09 - up 10/32 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 Friday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 5-29-2010 to 6-28-2010:

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 May, slightly less than expected, and mainly due to lower gasoline prices. This follows a gain of a gain of 0.4% in April, a 0.3% gain in March, and a 0.1% gain in February. Year-over-year, personal income is up 1.6%.
  
  Consumer spending was up 0.2% in May, more than expected, and follows no change in April. Overall, the consumer sector is slowly gaining strength in terms of spending power. Inflation is still almost nonexistent as the core Personal Consumption Expenditures (PCE) index is up only 0.2%.
  
  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.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates are still at historic lows, and have not been this low since 1953. Bear in mind that mortgage rates could go even lower, but most likely it won't be by much as the European, Chinese and Japanese markets are showing signs of improvements. However, the US continues on its deficit spending spree, and is causing consternation among the other members of the G8. In any case, I would not risk the chance waiting for lower mortgage rates.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Mortgage Rate Forecast for June 25, 2010

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities (MBS) Are Doing Today:

• The price of the FNMA 30-Year 4.0% MBS coupon opened at 100.41 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 100.41 - the same as its opening.

It is customary in the MBS market to track the coupon that is running closest to par, which is 100.00. Due to market improvements, we are now tracking the FNMA 4.0% coupon. Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be about the same in price this morning as compared to late yesterday afternoon.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 5-26-2010 to 6-25-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Final Revision to the 4th Quarter Gross Domestic Product (GDP) - the GDP in the 4th Quarter of 2009 was revised downward from 3.0% to an annualized rate of 2.7%. The downward adjustment is attributed to an upward revision in imports and a downward revision to personal expenditures. Year-on-year, however, real GDP is up 2.4% compared to 0.1% in the 4th quarter. Economic recovery has slowed as unemployment remains high and confidence remains low. It's not expected that consumers will be purchasing more goods again any time soon. In addition, the home buyer tax credits have expired. While significant, the data usually does not have an impact on the mortgage market or mortgage rates.
  
  
• University of Michigan's Index of Consumer Sentiment - came in with a reading this morning of 76.0, a little better than expected, indicating that consumer sentiment continues to bounce back, and is at its highest level since January 2008. The past 3 readings were 75.5 in May, 73.3 in April, and 69.5 in March. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. This report indicates that consumers are more likely to make purchases soon, and helped to drive down mortgage rates this morning.

In other news, in an overnight marathon session, the House and the Senate agreed on a financial reform package. It's expected the bill will be sent to the president for his signature by July 4th.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates are edging up. Yesterday, the price of the FNMA 30-Year 4.0% Coupon closed at 100.41, down 34 basis points from the previous day's high. Bear in mind that mortgage rates are now near their all-time lows. They could go even lower, but most likely it won't be by much as the European, Chinese and Japanese markets are showing signs of improvements. So, I would not risk the chance waiting for lower rates.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

As the housing sector kept sucking for more oxygen, Washington announced back in February the Hardest Hit Fund worth $1.5 billion that was designed to help states in serious housing peril and asked them at the time, as a condition to get a slice of the money, to submit creative programs that would lend a hand to homeowners struggling with mortgage payments. The plans from Arizona, California, Florida, Michigan and Nevada have now been okayed by the Treasury and the assigned funds are ready to begin flowing to the states' Housing Finance Agencies, or HFA, tasked to administer their use.

California drew the largest share at $699.6 million, Florida got $418 million, Michigan $154.5 million, Arizona $125.1 million and Nevada $102.8 million. Apparently the split was based largely on population size, which certainly is one way to do it.

A fairer method might have been to look at the current mortgage foreclosure rate in each state, in which case Nevada - with Las Vegas as its much-pummeled real estate meltdown epicenter - would have picked up a bigger portion of the proceeds. Negative equity measure, or being underwater, would be another metric that could have been used here. Again, Nevada would have ranked right up there for more funds than what it now received.

Each state presented its own innovative program for mortgage borrower relief, but a few predictable items appear on everyone's list. The most prevalent one is principal reduction, something that all address in a variety of ways. It clearly is the key in any plan, government or private, to stabilize housing markets from Florida to Nevada and beyond. The Obama Administration is putting increasing emphasis on it, but its actions need more support from mortgage lenders who so far have been reluctant to do much about it.

Unemployed homeowners get help to meet their mortgage obligations while looking for work is another popular feature. As is the assistance to handle the complexities of a second mortgage that may be hindering loan modification or any other real estate transaction, like a short sale.

Hardest Hit Fund will have a second phase later this year, covering the next tier of states lured into the now infamous mortgage and real estate backwater. It will bring some relief to a still festering housing situation, but for a real impact to be achieved the private sector needs to step up to the plate with a hot bat.

Mortgage Rate Forecast for June 23, 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 4.0% MBS coupon opened at 100.69 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 100.69 - the same as its opening.

It is customary in the MBS market to track the coupon that is running closest to par, which is 100.00. Due to market improvements, we are now tracking the FNMA 4.0% coupon. 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 the same in price this morning as compared to yesterday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 5-24-2010 to 6-23-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• New Home Sales - fell 33% in May to an annualized rate of 300,000 homes - the lowest rate since 1963 - and is much less than expected. Analysts were expecting to see an annualized rate of 400,000 homes. In addition, the inventory of new homes on the market surged to an 8.5 month supply. The average price of new homes fell 1.0% to $200,900. It's clear that the extended home buyer tax credit helped to sell new homes in March and April. And, as expected, we saw a decrease in new home sales now that the homebuyer tax credit has expired. Normally, this data did not have much of an impact on the mortgage market this morning. However, this report is fairly significant and led to lower mortgage rates this morning.

In other news, the Treasury Dept. will be auctioning $38 billion in 5-Year Notes today. The Notes are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond market move higher (resulting in lower mortgage rates) during afternoon trading. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to a broader selling in bonds and mortgage backed securities. The selling of mortgage backed securities could result in higher mortgage rates.

The Federal Open Market Committee (FOMC) will adjourn this afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. There appears to be more and more discussion about when the Fed will have to start raising key interest rates to prevent inflation from strengthening. If the statement gives any hint of when that may be, or there is a change in the regular canned portions of the statement, we could see a sizable change to mortgage rates Wednesday afternoon.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates continue to go lower. Yesterday, the price of the FNMA 30-Year 4.0% Coupon closed at 100.69. While it's still possible that mortgage rates could go even lower, it won't be by much. It's becoming increasingly unlikely as the European, Chinese and Japanese markets are showing signs of improvements. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Rate Forecast for June 22, 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 103.03 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 103.12 - up 3/32 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 0.125 points better in price this morning as compared to yesterday.

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 5-23-2010 to 6-22-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Existing Home Sales Report - released by the National Association of Realtors (NAR), this report provides us with a measurement of housing sector strength and mortgage credit demand. Existing home sales fell 2.2% in May to an annualized rate of 5.66 million homes - lower than expected. The inventory of unsold homes fell slightly to an 8.3 month supply which could lead to a further decrease in market values. The housing market may be stabilizing as sales prices of homes firmed up, but the homebuyer tax credit could have had an impact on the surge in home sales back in March and April. While significant, this report had no impact on the mortgage market or mortgage rates this morning.

In other news, the Treasury Dept. will be auctioning $40 billion in 2-Year Notes today. The Notes are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond market move higher (resulting in lower mortgage rates) during afternoon trading. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to a broader selling in bonds and mortgage backed securities. The selling of mortgage backed securities could result in higher mortgage rates.

The Federal Open Market Committee (FOMC) meets today, and will adjourn tomorrow afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. There appears to be more and more discussion about when the Fed will have to start raising key interest rates to prevent inflation from strengthening. If the statement gives any hint of when that may be, or there is a change in the regular canned portions of the statement, we could see a sizable change to mortgage rates Wednesday afternoon.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates have returned to their lows of the year. Yesterday, the price of the FNMA 30-Year 4.5% Coupon closed at 103.03, the same as its all-time high on June 9th. After the open this morning, the MBS coupon rose again in price, and is now at its new all-time high.

While it's still possible that mortgage rates could go even lower, it won't be by much. It's becoming increasingly unlikely as the European, Chinese and Japanese markets are showing signs of improvements. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Rate Forecast for June 21, 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 102.91 this morning - the same as Friday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 102.72 - down 6/32 from its opening.

Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be as much as 0.25 points worse in price this morning as compared to Friday.

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 5-22-2010 to 6-21-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• There are no economic reports scheduled for release today.

In other news, the markets are still not certain about the economic outlook with Europe's debt problems. However, there is some good news coming out of Europe as well as better economic performance in China and Japan.

The Federal Open Market Committee (FOMC) meets tomorrow and Wednesday, and some feel that the Fed may lower its outlook for the economy in the second half of this year and into 2011.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates have returned to their lows of the year. On Friday, the price of the FNMA 30-Year 4.5% Coupon closed at 102.91, which is only 12 basis points lower than its all-time high of 103.03. After the open this morning, the MBS coupon fell in price, and is now within 31 basis points of its all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.750% with 0.375 points on Friday, and if price of the MBS 4.5% coupon were to go as high as 103.03, then the best the 30 year fixed mortgage rate would be is 4.75% with no points today.

While it's still possible that mortgage rates could go even lower, it won't be by much. It's becoming increasingly unlikely as the European, Chinese and Japanese markets are showing signs on improvements. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Rate Forecast for June 18, 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 102.97 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 102.94 - down 1/32 from its opening.

Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be the same in price this morning as compared to yesterday.

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 5-19-2010 to 6-18-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• There are no economic reports scheduled for release today.

In other news, today is "quadruple witching" day. Quadruple witching refers to the expirations of options and futures contracts that can cause increased volatility in the stock markets. While it has no direct impact on the bond or mortgage markets, this sometimes leads to funds being moved into or out of bonds and mortgage backed securities. Mortgage rates usually are not affected unless the major indexes experience significant swings.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates have returned to their lows of the year. Yesterday, the price of the FNMA 30-Year 4.5% Coupon closed at 102.97, which is only 6 basis points lower than its all-time high of 103.03. After the open this morning, the MBS coupon rose in price, and is now within 6 basis points of its all-time high.

While it's still possible that mortgage rates could go even lower with the ongoing economic crisis in Europe, it won't be by much. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.

Subprime home loans became a noteworthy ingredient in the recent real estate frenzy. Large pools of them were sold on the secondary mortgage market as RMBS, or residential mortgage-backed securities, to supply additional liquidity for more loans. When the air suddenly escaped from the tremendous housing bubble the first mortgage product to absorb its swift and devastating effects was the subprime kind, leaving scores of investors wondering what had whacked them.

Moody's Investors Service details that subprime RMBS issued from 2005 to 2008 reached a delinquency level of 54.4% in January of 2010, an all-time high. From there on, though, the rate has been steadily falling, settling at 51.5% in April, a moderate improvement. But it had been climbing continuously for years since the real estate market's collapse, so a change downward, even if slow, is desirable news. In short, subprime mortgage borrowers are bringing their loans current at an increasing rate. Everybody likes to see that.

According to Moody's research HAMP, or Home Affordable Modification Program, has been a major contributor to this. HAMP has received sometimes loud criticism for its lack of bite, but Moody's numbers appear to show otherwise. In January 117,302 trial modifications were converted into active permanent ones and then in April the same happened to 299,092 of them. That's real progress.

Re-defaults are still a problem, however. Moody's estimates that 50-70% of permanent mortgage loan modifications will do so, thanks to the underwater, or negative equity, dynamic affecting so many states. Worst-mauled areas like Las Vegas and Phoenix are extremely ripe here. The emphasis now from the government is to get home loan lenders and servicers to lower principal for borrowers, a task that has been tough in the past and probably will stay so.

It seems that HAMP needed quite a bit of time to get in gear and now it's cruising along under full power and is showing some encouraging results.

Rate Forecast for June 17, 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 102.58 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 102.66 - up 3/32 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 0.125 points better in price this morning as compared to yesterday.

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 5-18-2010 to 6-17-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Jobless Claims - 472,000 new claims for unemployment were filed last week, and 22,000 more than expected, and 12,000 more than the upwardly adjusted 460,000 claims filed the previous week. The four-week average for unemployment is holding fairly steady at 463,500. Continuing claims for the week of June 5 rose by 88,000 to 4.471 million. All signs indicate the economy has been recovering of late but without much of an increase in jobs. This data is usually not considered to be very important to the mortgage market. However, this report led to lower mortgage rates this morning.
  
  
• Consumer Price Index (CPI) - as expected, the overall price index fell by 0.2% in May - mostly because of lower gasoline prices. The core data which excludes the more volatile food and energy prices rose 0.1% as expected. This is one of the most important monthly reports that we see as it measures inflationary pressures at the consumer level of the economy. With unemployment still at high, this report shows that inflation continues to be being held in check even as the overall economy is improving. This report had no impact on the mortgage market or mortgage rates this morning.
  
  
• Leading Economic Indicators (LEI) - rose 0.4% in May, and is a little worse than the expected 0.6% rise. This follows a 0.1% decline in April and a 1.4% increase in March. This Conference Board report attempts to predict economic activity over the next three to six months. This report indicates that economic activity is improving, but the overall outlook is still uncertain. This report had no impact on the mortgage market or mortgage rates this morning.

In other news, the Treasury Dept will announce later this morning the terms of the Notes and Bond auctions scheduled for next week. The Notes and Bonds are used to finance the massive government debt, and the results of these auctions could affect mortgage rates next week.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates are again off their lows of the year. On yesterday, the price of the FNMA 30-Year 4.5% Coupon closed at 102.56, 47 basis points lower than it's all-time high of 103.03. After the open this morning, the MBS coupon rose in price, and is now within 37 basis points of its all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.75% with 0.375 point yesterday, and if price of the MBS 4.5% coupon were to go as high as 103.03, then the best the 30 year fixed mortgage rate would be is 4.75% with no points today.

While it's still possible that mortgage rates could go even lower with the ongoing economic crisis in Europe, it won't be by much as fears of debt defaults in Europe are lessening. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.