Trend and Forecast in Mortgage Rates on July 30, 2010 - Improving, or...?
Here are some of the events affecting mortgage rates today:
What Mortgage Backed Securities (MBS) Are Doing Today:
- The price of the FNMA 30-Year 4.0% MBS coupon opened at 102.09 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 102.56 - up 9/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and so do mortgage rates. I expect that mortgage rates will be up to 0.250 points better in price this morning as compared to yesterday.
Price Trend in Mortgage Backed Securities:
The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 6-30-2010 to 7-30-2010:
Economic Reports, News, and Events Affecting Mortgage Rates Today:
- Preliminary Reading of the 2nd Quarter Gross Domestic Product (GDP) - the GDP in the 2nd Quarter of 2010 grew at an annualized rate of 2.4%, slightly less than expected, and much less than the 5.4% growth rate in the 4th Quarter of 2009 and the 3.7% growth rate of the first quarter of 2010. So far, this has been a jobless recovery, and weekly unemployment in recent weeks has continued at just above the 450,000 level. As confidence remains low and unemployment remains high, it's not expected that consumers will be purchasing more goods again any time soon. While significant, the data did not have an impact on the mortgage market or mortgage rates this morning.
- Employment Cost Index (ECI) - is up 0.5% for the 2nd quarter of 2010, slightly more than the 0.4% increase that was expected. The ECI measures the costs of employee wages and benefits, this providing us with an indication of the threat of wage inflation. Wages & salaries rose 0.4% while benefits rose 0.6%. The year-over-year rate for wages & salaries is up 1.8%. The ECI report did not have an impact on the mortgage market or mortgage rates this morning.
- University of Michigan's Index of Consumer Sentiment - came in with a reading this morning of 67.8, a little better than expected, but still down significantly from April's and May's readings. The past 3 readings were 66.5 in June, 75.5 in May, and 73.3 in April. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. This report indicates that consumers are not very likely to make many purchases. The consumer sentiment report did not have an impact on the mortgage market or mortgage rates this morning.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past 3 years:
Mortgage Rate Forecast:
Mortgage rates are at their historic lows - they haven't been this low since the early 1950s - and continue to go lower as the global economic crisis continues. However, the stock market is over sold while the bond market is over bought. It also appears that banks in Europe are not as bad off as previously thought. Mortgage rates could head up soon as the markets begin to correct themselves. As such, I would not take too much of a chance in waiting for even lower mortgage rates.
If you're happy with the mortgage rate being offered to you today and if you don't want to risk mortgage rates moving higher, then you should apply and lock in now. It's better to have locked when you should have floated than it is to float when you should have locked.
Are you in need of a mortgage to purchase a home? Or want to refinance an existing mortgage into a lower permanent fixed rate? Or want to take cash out of the equity of your home? Or consolidate debt and reduce the monthly bills? Then be sure to request a mortgage rate quote today!
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB