Mortgage rates dipped last week to a two month low. But we'll likely see them bounce back up in response. Additionally, there is no indication they will go down any further. Inflation is the key driver here, despite the weak economy, and it's not letting up as the summer gets into full swing. I recommend getting a rate locked now, as they are still historically low.
When the stock markets lose triple digits and mortgage bonds don't blink, it's a pretty good sign we have greater odds for less bond demand - and higher rates. Still, there's no indication that rates are breaking out of the channel they've been trading in for weeks.
It is strange to say, but we should be cheering the lousy growth pattern. If the economy was moving upward, the additional demand would push inflation and interest rates higher. At present, all we can hope for is that the economy breaks inflation before inflation completely breaks the economy.
While overall mortgage interest rates managed a little improvement last week, surprisingly. However, rates have more or less been generally flat for weeks, and that stability is a welcome stance in a weary market. There's not much likelihood of a huge movement this week, but we may see rates rise a couple of basis points or so.
The Conference Board started this week's economic releases with their Consumer Confidence Index (CCI) May. It showed a weaker than expected level of confidence with a reading of 57.2 when it was forecasted to stand at 60.0. This was the lowest reading in 16 years, indicating that consumers are not very optimistic about their personal financial situations. This is considered good news for bonds and mortgage rates because it usually means consumers are less likely to make large purchases in the near future.
April's New Home Sales data was also released today, revealing a higher level of sales than was expected. However, today's report also revised March's sales downward. This means that sales were weaker than thought in March, but the month to month increase was fairly large. This is bad news for bonds because a weak housing sector usually translates into weaker economic conditions in general.
Tomorrow morning we will see April's Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 1.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth.
Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.
Search today's mortgage rates anonymously. And, as always, you can call me at (508) 471-4144 with any questions about mortgage rates and to discuss your best loan options.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB