The Mortgage Interest Rate Lock Advisory for August 20, 2009
Here are some of the events affecting mortgage interest rates today in Massachusetts, Maine, and New Hampshire.
What the Mortgage Backed Securities Market is Doing Today:
The price of the FNMA 30-Year 4.5% MBS coupon opened down 2/32 this morning to 100.06.
The price of the FNMA 30-Year 4.5% MBS coupon closed up 10/32 yesterday to 100.13 (as shown by the white line). MBS is currently up 2/32 to 100.19. Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and mortgage interest rates come down with it. I expect that mortgage interest rates will essentially be the same in price today as compared to yesterday.
Economic Reports Affecting Mortgage Interest Rates Today:
- Leading Economic Indicators (LEI) for July - The Conference Board revealed a 0.6% increase in the LEI, slightly less than the 0.7% increase analysts expected. The index attempts to measure the potential for economic growth over the next few months. The index has risen three months in a row with the latest month, June, posting a 0.7% gain. Because this reading almost matched forecasts, it had little impact on mortgage interest rates this morning.
- Jobless Claims -576,000 new claims for unemployment were filed last week, much more than the 550,000 new claims that analysts predicted. Continuing claims for unemployment increased slightly to 6.241 million. This indicates that it's still taking time for the jobless to find work, with some are either finding work or have exhausting 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 very important to the mortgage market and had no impact on mortgage interest rates this morning.
- 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 $741 billion in MBSs this year. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.
News and Events That Could Affect Mortgage Interest Rates Today:
The Philadelphia Fed index reported a reading of 4.2 for August, up from a -7.5 reading in July. Any reading over 0.0 is considered an expansion. The is the first expansion in almost a year.
There are only a few economic reports scheduled for release this week. We'll have the Existing Home Sales report on Friday. 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 Interest Rates Today:
Moderate to High Volatility. Overall, mortgage backed securities will likely be influenced mostly by stock prices - which may be quite volatile - and the 10-year Treasury yield for the rest of the week. So, if you're floating your mortgage interest rate, please keep an eye on the markets and maintain contact with your mortgage professional.
If you're waiting and hoping the 30 year fixed mortgage interest rate will dip below 5.0% (at no points) again, I want you to know that, while not impossible, and as the past few weeks have proven, it's becoming increasingly unlikely. The apparent theme indicates the recession is over (or at least has hit bottom), and markets are reacting accordingly.
It appears that mortgage interest rates are stabilizing and are heading lower - at least for now - as investors begin to realize the recession is not yet over. However, you can expect mortgage interest rates to generally move higher in the coming weeks and months. The primary reasons are 1) the recession, while not over, appears to be bottoming out; 2) the housing market, while still declining in some areas, appears to be stabilizing; 3) the rate of job loss has stabilized and may be 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 mortgage interest rates turn for the worse?
If you're refinancing and have tired of the roller coaster ride, then I suggest you consider locking in now and being done with it. If you're willing to take the risk and continue watching mortgage interest 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 Mortgage Interest Rate Lock Advice for Today:
If I were considering financing/refinancing a home, I would...
- Lock if my closing was taking place within the next 7 days
- Lock if my closing was taking place between 8 and 30 days
- Float if my closing was taking place between 31 and 45 days
- Float if my closing was taking place between 46 and 60 days
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 interest rates for Massachusetts, Maine and New Hampshire at www.LewCorcoran.com/RateSheet.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB