The Mortgage Interest Rate Lock Advisory for August 27, 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 100.25.
The price of the FNMA 30-Year 4.5% MBS coupon closed unchanged yesterday from its close the previous day at 100.31 (as shown by the white line). MBS is currently trading down 4/32 at 100.19 (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 interest rates will be up to 0.125% worse in price this morning as compared to yesterday.
Economic Reports Affecting Mortgage Interest Rates Today:
- First Revision to the 2nd Quarter Gross Domestic Product (GDP) - There was a 1.0% decline in the GDP in the 2nd quarter, a little less than the 1.5% decline that analysts expected. This indicates that the economy is not as weak as analysts thought. This is considered negative news for bonds (prices rise and yields fall) as the decline was not as bad as predicated, and caused mortgage interest rates to be 0.125% worse in price this morning.
- Jobless Claims - There were 570,000 new claims filed for unemployment last week, about as analysts predicted. There were 576,000 new claims filed the previous week. The four-week average is steady at 566,250 while continuing claims for unemployment decreased last week to 6.133 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.
- Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $766 billion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through December 31st.
News and Events That Could Affect Mortgage Interest Rates Today:
The results of the 7-Year Note auction will be posted at 1 pm EDST 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