Professional Home Staging and Photography Blog: The Daily Mortgage Interest Rate Lock Advisory - March 16, 2009

The Daily Mortgage Interest Rate Lock Advisory - March 16, 2009

What the Markets Are Doing Today:

The bond and mortgage backed securities (MBS) markets both opened in negative territory again this morning but gained as the day wore on. Meanwhile, stocks opened up as they continue their advance for the 5th consecutive day. Investors are hoping that the stock market has bottomed out and is beginning to stabilize.

  • The Dow opened up 67 points from Friday's close
  • NASDAQ opened up 11 point from Friday's close
  • The 10 Year Treasury Bond opened down 9/32 from Friday's close
  • FNMA 30 Year 4.5% coupon opened down 12/32 from Friday's close

Remember, on MBSs, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. MBS closed on Friday down 3/32 from its opening and is currently down 1/32 this morning. I expect mortgage rates will cost 0.125% - 0.25% more in pricing today.

Economic Reports Being Released Today:

  • Industrial Production Report for February - Industrial production fell 1.4% in February, the 5th consecutive month it declined, and is a little worse than expected. Analysts were expecting a 1.2% decline. As a comparison, industrial production fell 1.9% in January and fell 2.4% in December. The decline was led by the utilities sector which fell 7.7%. The mining sector, however, fell only 0.4%. While the manufacturing sector fell 0.7%, motor vehicles and parts production jumped 10.2%. A rising operating rate may be a warning sign of inflationary pressures and would be considered bad news for bonds and mortgage backed securities (which leads to higher rates). However, industrial production is still quite weak as it has fallen in 11 of the last 13 months. This overall decline is considered good news for bonds and mortgage backed securities (which leads to lower rates).

Important News of the Day:

In an interview with CBS's 60 Minutes yesterday, Ben Bernanke, Chairman of the Federal Reserve, said that the recession will end by the end of 2009 unless political leaders withdraw support for efforts to stabilize the financial system.

"We'll see the recession coming to an end probably this year," Bernanke said. "We'll see recovery beginning next year."

"The biggest risk is that, you know, we don't have the political will," he said. "We don't have the commitment to solve this problem, and that we let it just continue." "In which case, we, we can't count on recovery."

There are several important economic reports that will be released this week - including the Producer Price Index and the Consumer Price Index, and another Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, I am expecting to see some movement in the markets, and there's continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations.

Stock investors are hoping a sustained rally could mean that the worst of the recent financial market meltdown is over. But that could lead to a new problem: diminishing support for bonds. Prices of treasuries may continue to fall (higher yields) if the recent stock market rally continues. However, there are reports that Ben Bernancke is considering purchasing long term bonds to help keep their yields down. If true, this would be similar to what the Bank of England is now doing. The rationale behind this is if the yields on treasuries are lower, then it may encourage investors to buy mortgage backed securities (MBS) instead as they will be paying a higher yield. This will drive the prices of MBS up which in turn lowers their yields (but still pay more than treasuries) and in turn lower mortgage rates. Remember, the government wants to keep mortgage rates low to help revitalize the housing industry which in turn will help to spark the economy. While this would be great news for the mortgage market, keep in mind that it's just a contingency plan and it may not be enacted. Also keep in mind that the Fed does not and can not set mortgage rates.

If you haven't locked in a rate yet, then you may want to continue floating. While floating continues to make sense right now, the ever increasing massive government debt could soon drive mortgage rates up. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

  • Float if my closing was taking place within 7 days
  • Float if my closing was taking place within 8 and 30 days
  • Float if my closing was taking place between 31 and 60 days
  • Float if my closing was taking place over 60 days from now

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.


East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Comment balloon 1 commentLew Corcoran, ASP® • March 16 2009 09:49AM


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