Professional Home Staging and Photography Blog: The Daily Mortgage Interest Rate Lock Advisory - May 15, 2009

The Daily Mortgage Interest Rate Lock Advisory - May 15, 2009

What the Markets Are Doing Today:

The bond market, mortgage backed securities and the stock markets all opened in positive territory this morning following a better than expected economic reports.

  • The Dow opened up 31 points from yesterday's close
  • NASDAQ opened up 5 points from yesterday's close
  • The 10 Year Treasury Bond opened up 3/32 from yesterday's close
  • FNMA 30 Year 4.0% coupon opened up 2/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed up 3/32 (white line) from its opening yesterday, and is currently down 6/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will again be the same today as they were yesterday.

Economic Reports Being Released Today:

  • Consumer Price Index (CPI) Report for April - This is similar to Producer's Price Index (PPI) report, but measures inflationary pressures at the more important consumer level of the economy. There was no change in the overall index from the previous month, but the core data reading rose 0.3%, slightly more than expected. The core data is the more important of the two because it excludes the more volatile food and energy prices. This is considered bad news for bonds (lower prices and higher yields and mortgage rates) because it indicates that the prices at the consumer level are rising quicker than thought, thus raising the concerns for inflation.

  • Industrial Production Report for April - This measures manufacturing sector strength by tracking output at factories, mines and utilities. The production report revealed a 0.5% decline in output - analysts forecasted a 0.6% decline - and follows a 1.5% decline in each of the previous two months. This indicates that the contraction in manufacturing activity may be slowing. A smaller decline in output is considered bad news for the bond market and mortgage rates (lower prices and higher rates) because it would indicate that the manufacturing sector is stronger than expected.

  • University of Michigan's Index of Consumer Sentiment - This is a preliminary report; this index measures consumer willingness to spend and usually has a moderate impact on the financial markets. The sentiment index came in at 67.9 - analysts predicted a reading of 67.0 - and is higher than the 65.1 reading the previous month. This too is considered bad news for the bond market and mortgage rates (lower prices and higher rates).

Important News of the Day:

GM today announced plans to close 1100 out of 6200 dealerships. Fritz Henderson, the CEO of GM, also stated that GM will probably file for bankruptcy protection on June 1st, and that it intends to close 50% of its dealerships.

Next week will be pretty light in terms of scheduled economic releases. There are no major economic reports scheduled for release next week except for the minutes from the last FOMC meeting. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it's been a pretty active week for mortgage rates. Look for the stock markets to continue to have a major influence on bond trading. There were several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

  • Float if my closing was taking place within 7 days
  • Float if my closing was taking place within 8 and 30 days
  • Float if my closing was taking place between 31 and 60 days
  • Float if my closing was taking place over 60 days from now

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 rates at


East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Comment balloon 0 commentsLew Corcoran, ASP® • May 18 2009 07:02AM


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