Mortgage Rate Forecast for August 3, 2010 - Improving, or...?
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 102.22 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 102.28 - up 2/32 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 about 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 7-4-2010 to 8-3-2010:
Economic Reports, News, and Events Affecting Mortgage Rates Today:
- Personal Income and Outlays Report - personal income was unchanged in June, slightly less than expected, and follows a gain of 0.4% in May. Year-over-year, personal income is up 1.6%. Consumer spending was also unchanged in June, slightly less than expected, and follows a gain of 0.1% in May.
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 shows that until the unemployment situation improves, consumers are not willing to spend. It also shows that inflation is not yet a factor. This report had no impact on the mortgage market or mortgage rates this morning.
- Factory Orders - fell 1.2% in June, worse than the 0.5% decline that was expected, and follows a 1.8% decline in May. This report also shows that, overall, the manufacturing sector is weakening. This report is similar to the Durable Goods Orders report that was released late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. This report had no impact on the mortgage market or mortgage rates this morning.
- Pending Home Sales Index Report - revealed that pending home sales fell 2.6% in June, and follows a 30% decline in May. Year-on-year, pending home sales is down 18.6% from a year ago. Released by the National Association of Realtors, the pending home sales index is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract to purchase a home was signed, but has not yet made settlement. This report had a positive impact on the mortgage market and led to improved pricing for mortgage rates this morning.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past 5 years:
Mortgage Rate Forecast:
Mortgage rates are at their historic lows - they haven't been this low since the early 1950s - and continue to go lower as the global economic crisis continues. However, the stock market is over sold while the bond market is over bought. Mortgage rates could head up soon as the markets begin to correct themselves. As such, I would not take too much of a chance in waiting for even lower mortgage rates.
If you're happy with the mortgage rate being offered to you today and if you don't want to risk mortgage rates moving higher, then you should apply and lock in now. It's better to have locked when you should have floated than it is to float when you should have locked.
Are you in need of a mortgage to purchase a home? Or want to refinance an existing mortgage into a lower permanent fixed rate? Or want to take cash out of the equity of your home? Or consolidate debt and reduce the monthly bills? Then be sure to request a mortgage rate quote today!
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB