Here are the factors affecting mortgage interest rates in Massachusetts, Maine and New Hampshire today.
What the Mortgage Backed Securities (MBS) Market is Doing Today:
The FNMA 30-Year 4.5% MBS coupon opened down 3/32 this morning to 99.72 on concerns about the amount of debt the government is auctioning.
The price of the FNMA 30-Year 4.5% MBS coupon closed up 4/32 yesterday to 99.81 (as shown by the white line). MBS is currently trading down 8/32 at 99.56 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage interest rates. I expect that mortgage rates will be 0.125% - 0.25% worse in price this morning as compared to yesterday.
Economic Reports for Today:
- Jobless Claims - 584,000 new claims for unemployment were filed last week, and was about as expected. Analysts predicted that 585,000 new claims would be filed. This marks a 25,000 increase in claims filed over the previous week. Continuing claims for unemployment fell for the third straight week last week to 6.197 million, the lowest since April. This still indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With the high rate of people unemployed, the threat of wage based inflation remains 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. This data is usually 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 $681 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
Important News of the Day:
Yesterday, the Fed's Beige Book report indicated that the economy is stabilizing in several regions of the U.S. Economic strength makes long-term securities such as bonds and mortgage-related bonds less attractive to investors. A strengthening economy causes prices of bonds and mortgage backed securities to fall and mortgage interest rates to rise.
The sale of the 5-year Note did not go well yesterday. Many are concerned that there's little chance of a strong demand in today's 7-year Note sale. If we do get another lackluster interest in today's auction, we most likely will see further weakness in bonds this afternoon. That may cause prices of bonds and mortgage backed securities to fall further and mortgage interest rates to rise this afternoon.
There are a number of economic reports scheduled for release this week that could have affect mortgage rates. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog.
What's Happening With Mortgage Rates Today:
Moderate to High Volatility. Overall, it may be a fairly active week in the mortgage market. With several important economic reports scheduled for release this week, we will likely see noticeable movement in mortgage rates over several days. While the preliminary GDP reading, to be released on Friday, is the most important report of the week, several of releases and scheduled events have the potential to influence mortgage rates. Therefore, it's difficult to say which day we can expect to see the most movement in rates.
If you're waiting and hoping the 30 year fixed rates will dip below 5.0% (at no points) again, I want you to know that, while not impossible, it's becoming increasingly unlikely. The primary reasons are 1) the recession appears to be bottoming out; 2) the housing market, while still declining, is appearing to be stabilizing; 3) the jobless rate is slowing; and 4) corporate earnings reports show that companies are beginning to earn bigger profits. So, ask yourself this question: Will it hurt me more to lock in now and watch rates drop another eighth or a quarter point, or will it hurt me more to keep floating and watch rates turn for the worse? If you're refinancing and have tired of the roller coaster ride, then I suggest you lock in now and be done with it. If you're willing to take the risk and continue watching rates, then keep a wary eye on the markets and maintain contact with your mortgage professional, because the markets can change at any moment.
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
Lew Corcoran, ASP®, IAHSP, IAHSP-CB