Professional Home Staging and Photography Blog: The Daily Mortgage Interest Rate Lock Advisory - May 28, 2009

The Daily Mortgage Interest Rate Lock Advisory - May 28, 2009

What the Markets Are Doing Today:

The bond market and mortgage backed securities markets as well as the stock markets opened in positive territory this morning. However, all markets are losing their gains of the morning

  • The Dow opened up 62 points from yesterday's close
  • NASDAQ opened up 14 points from yesterday's close
  • The 10 Year Treasury Bond opened up 12/32 from yesterday's close
  • FNMA 30 Year 4.5% coupon opened up 5/32 from yesterday's close

The price of the FNMA 30-Year 4.5 coupon closed down 2-9/32 (white line) from its opening yesterday, but is currently up 1/32 (blue line). Remember, on MBSs, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. I expect that mortgage rates today will be as much as 1% worse in rate from yesterday's opening.

Economic Reports Being Released Today:

  • Durable Goods Orders Report for April - The report showed an increase of 1.9% in durable goods orders for April - this is much higher than the predicted rise of just 0.5% - and is the biggest monthly gain since December 2007. This follows a revised drop of 2.1% in March. Most of the increase is attributed to automobile orders and defense spending. Excluding defense spending, however, durable goods orders fell 1.5%. The overall year-to-year durable goods orders (April 2008 - April 2009) is down 24.4% while non-defense related durable goods orders is down 32.8%. This report is considered negative news for bonds (lower prices and higher yields) because rising manufacturing activity indicates the economy is expanding.

  • New Home Sales - This report gives us a measurement of the strength of the housing market and future mortgage credit demand. New home sales came in at an annualized rate of 352,000, which is slightly less than the 360,000 that was expected. This compares to 356,000 new homes sales in March. Since April 2008, sales of new homes have fallen 34%. The supply of new homes on the market - now standing at 297,000 units - continues to dwindle, and is now down to a 10.1 month inventory - the lowest level in 8 years. However, this report is not considered to be of much importance to the bond market.

  • Jobless Claims - 623.000 new claims for unemployment were filed last week, less than the 635,000 new claims that were predicted. Continuing claims for unemployment rose for the 19th week in a row by 110,000 to another new record of 6.772 million. Unemployment now stands at 9.0%. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is 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. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.

  • 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 $481 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Important News of the Day:

The Feds will be holding a 7-year Treasury Note auction which may impact bond trading and possibly mortgage rates later today. Yesterday's 5-year sale was met with a respectable demand, so hopefully today's sale will also go well. Results will be posted at 1:00 PM ET, so any reaction to the bond market will occur during afternoon trading hours.

A total of six important economic reports or news are being released this week. Two of the six reports - the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

High Volatility. For a brief overview of what happened in the MBS markets yesterday, please read my Daily Interest Rate Lock Advisory.

Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously 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. In addition, there are sign that the global recession is easing, and there is a growing concern over the potential for inflation due to the massive government borrowing and spending.

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...

  • Lock if my closing was taking place within 7 days
  • Lock 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 www.LewCorcoran.com/RateSheet.

 

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 2 commentsLew Corcoran, ASP® • May 28 2009 11:25AM

Comments

Thank you for your input, it was helpful to me.  I am hoping there will be a day or at least an hour when the over reaction yesterday and today moves the other way in the next 30 days. Minette 

Posted by minette goldsmith about 9 years ago

The question to lock or not to lock has always been a quandry.  I think Lew's last four bullets smilifies matters.

Posted by Linda Landry (HomeSmart Realty) about 9 years ago

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