The Mortgage Interest Rate Lock Advisory for August 25, 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 up 1/32 this morning to 100.19 before reversing course on the release of the S&P/Case-Shiller home-price index, and on the news of Ben Bernanke's nomination to serve a 2nd term as Chairman of the Federal Reserve.
The price of the FNMA 30-Year 4.5% MBS coupon closed up 13/32 yesterday to 100.16 (as shown by the white line). MBS is currently down 5/32 to 100.00. 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 interest rates will essentially be the same in price today as compared to yesterday.
Economic Reports Affecting Mortgage Interest Rates Today:
- Consumer Confidence Index (CCI) for August - The CCI rose more than 7 points to 54.1 this month, well above the 48.0 reading that was expected, and is an increase from July's reading of 46.6. This index measures consumer sentiment about their own financial situations, and provides us a measurement of their willingness to spend. That is important because consumer spending makes up two thirds of the U.S. economy. An increase in the CCI indicates that consumers would more likely make large purchases in the immediate future. It appears that this report had little or no affect on the mortgage market today while the price of the 10-Year bond declined (higher yields) and the Dow moved higher.
News and Events That Could Affect Mortgage Interest Rates Today:
Ben Bernanke was nominated today to serve a 2nd 4-year term as Chairman of the Federal Reserve to begin January 31, 2010. His reappointment requires the approval of the Senate.
Home prices in 20 major cities across the U.S. fell less in June than predicted. The S&P/Case-Shiller home-price index fell 15.4% from a year ago, less than the 16.4% decline that analysts forecasted, and is less than the 17.0% decline reported in May. It's also the smallest decline in housing prices since April of 2008. This report indicates that the decline in housing prices appears to be moderating.
The results of the 2-Year Note auction will be posted at 1 pm EST today. If investor interest is strong, it should lead to higher prices of mortgage backed securities which in turn will lead to lower mortgage interest rates. However, a lackluster demand could lead to the selling of mortgage backed securities and higher mortgage interest rates this afternoon.
There are six relevant economic reports scheduled for release this week that could have an impact on the mortgage market. Look for more details on next 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, look for Tuesday to be the busiest day of the week with the release of the Producer Price Index. The rest of the week will likely be influenced more by stock prices than anything else, which may be quite volatile. 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 heading a little lower - at least for now - as investors begin to realize the recession is not quite over yet. 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