Mortgage Rate Forecast for August 25, 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 102.94 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 103.04 - up 4/32 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 0.125 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 7-26-2010 to 8-25-2010:
Economic Reports, News, and Events Affecting Mortgage Rates Today:
- Durable Goods Orders Report - durable goods orders rebounded slightly in July with an overall 0.3% increase, but is much worse than the 2.5% rise that was expected. This follows a 0.1% decline in May. When the transportation component is excluded, new durable goods orders fell 3.8% - indicating that manufacturing is not as strong as hoped. Year-on-year, overall new orders for durable goods are up 9.3%, and follows a 17.1% increase in June. This data is usually not considered to be very important to the mortgage market, but led to lower pricing on mortgage rates this morning.
- New Home Sales - fell more than 12% in July to an annualized rate of 276,000 homes - a record low - and 64,000 less than expected. New home sales rose more than 23% in June. Analysts were expecting to see an annualized rate of 340,000 homes. In addition, the inventory of new homes on the market rose to a 9.1 month supply. And, the average price of new homes fell 4.8% to $204,000. This data is usually not considered to be very important to the mortgage market, but also led to lower pricing on mortgage rates this morning.
In other news, the Treasury Dept. will be auctioning $36 billion in 5-Year Notes today. The Notes are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond market move higher (resulting in lower mortgage rates) during afternoon trading. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to a broader selling in bonds and mortgage backed securities. The selling of mortgage backed securities could result in higher mortgage rates.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past 10 years:
Mortgage Rate Forecast:
Mortgage rates are at their historic lows. They haven't been this low since the early 1950s. These low mortgage rates may be with us for some time - or they may not. Usually, mortgage rates go up during the summer months during the peak home buying season, then go down as the fall and winter seasons approach. But these are not "normal times." It's possible that mortgage rates will continue to slowly fall. However, as a few days last week have shown, they could turn at any time.
If you're thinking about refinancing your mortgage and if these low mortgage rates make sense to you, then take advantage of them while you can. 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