Professional Home Staging and Photography Blog: The Daily Mortgage Interest Rate Lock Advisory - March 23, 2009

The Daily Mortgage Interest Rate Lock Advisory - March 23, 2009

What the Markets Are Doing Today:

Prices of bonds and mortgage backed securities opened down (yields up) slightly this morning before reversing course and are now down price (yields down). Stocks also opened up on better than expected existing housing sales and on news of the "toxic asset" purchase program.

  • The Dow opened up 157 points from Friday's close
  • NASDAQ opened up 28 point from Friday's close
  • The 10 Year Treasury Bond opened down 1/32 from Friday's close
  • FNMA 30 Year 4.5% coupon opened down 3/32 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 down 6/32 from its opening on Friday, but is currently up 4/32 this morning. I expect mortgage rates will remain the same in pricing as on Friday's close.

Economic Reports Being Released Today:

  • Existing Home Sales Report - The National Association of Realtors announced late this morning that existing home resales rose 5.1% last month to an annualized rate of 4.62 million units. This is much better than the expected annualized rate of 4.5 million units. This means that the housing market is much more active than many had thought. Sales prices also firmed up, and are up 0.4% from the previous month. Meanwhile, the supply of homes on the market remains at 9.7 months. However, it's too early to tell if the housing market has hit bottom. This report is considered to be of low importance to the financial markets. Due to the pending announcement of the government's toxic asset plan, I do not expect this report to have any impact on the markets today.

Important News of the Day:

The Treasury Dept. released the details of the program to purchase up to $1 trillion in toxic assets from banks through the FDIC and the Federal Reserve. The toxic assets include mostly mortgage backed securities. This will be a public/private partnership with the government initially providing up to $75 - $100 billion for the program and private investors providing the rest.

However, some private investors may be reluctant to participate due to the recent turmoil surrounding AIG and the payments of bonuses to those in the financial sector. Investors are concerned that Congress may change the rules of the game midstream. Despite the concerns, equity investors and the global equity markets hope that the plan will finally put the financial institutions and the economy back on the road to recovery.

There are economic reports scheduled for release over several days this week, but none are considered to be of extreme importance. 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, it is difficult to label one particular day as the most important of the week. While the Durable Goods Orders is the most important report of the week, none of the week's data has the potential to be a major market mover. After the huge rally last Wednesday, we saw some weakness in bonds at the end of the week. It will be interesting to see how today's news on the government's plan to purchase up to $1 trillion in bank's toxic assets from the banks will influence this week's trading. If the markets react positively to the news, stocks could continue to move higher. This will put further pressure in bonds which in turn might lead to higher mortgage rates this week.

There's still 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. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. 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 0 commentsLew Corcoran, ASP® • March 23 2009 11:35AM


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