Daily Mortgage Rate Lock Advisory

Rate Lock Advisory – Monday Sep. 15th

Rate Lock Advisory – Monday Sep. 15th

Monday’s bond market has opened up sharply following a steep sell-off in stocks during early trading. The stock markets are reacting to news that Lehman Brothers filed for bankruptcy and other related financial sector news. This has pushed the Dow lower by 250 points and the Nasdaq down 33 points. The bond market is currently up 48/32, which should improve this morning’s mortgage rates by approximately .500 of a discount point.

The news the Lehman was unable to find buyers for its businesses and filed for bankruptcy protection has significantly raised concerns that the financial sector of the market is nowhere near stabilizing and has many fearing that more collapses may be coming in the near future. There are concerns about other banks and financial services companies on the verge of collapse that could create turmoil in international markets also. The benefactor to this news and concern is the bond market as investors seek safe-haven from the volatili ty. Whether this spike in bond prices will hold is unknown at this time, but what is a safe bet is that more news like this weekend’s reports could make mortgage-related bonds much more attractive to investors and may lead to a downward trend in mortgage rates.

Also contributing to this morning’s bond gains was a much larger decline in industrial production than analysts had expected. This morning’s release of August’s Industrial Production report revealed a 1.1% decline in factory output. This was much weaker than analysts’ forecasts of a 0.3% decline and indicates that the manufacturing sector was weaker than thought in August. This is good news for bonds and mortgage rates because slowing economic activity eases inflation concerns.

Tomorrow morning brings us the release of August’s Consumer Price Index (CPI). This is one of the most important reports we see each and every month. It is considered to be a key indicator of inflation at the consumer le vel of the economy. There are two readings in the report- the overall index and the core data reading. Current forecasts are calling for 0.1% decline in the overall reading and a 0.2% rise in the core data reading. A larger increase in the core data would likely lead to higher mortgage rates tomorrow, while a smaller increase would be good news.

The FOMC meeting will adjourn at 2:15 PM tomorrow. There is little debate about a possible change to key short-term interest rates at this meeting. The overwhelming consensus is that there will be no change to rates at this meeting. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find the Fed’s expected next move. The wild card is how the markets react to the statement. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates tomorrow afternoon and Wednesday morning.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 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 all/any other borrowers.

Tags: bankruptcy protection, bond, closing, consumer price index, decline, index cpi, inflation concerns, key indicator of inflation, lehman brothers, lock, mortgage rates, sector news, tomorrow

Rate Lock Advisory – Sunday Sep. 14th

Rate Lock Advisory – Sunday Sep. 14th

There are only four pieces of economic news scheduled for release this week and one of them is a highly important inflation reading. We also have another Federal Open Market Committee (FOMC) meeting, which likely will not bring a change to key short-term interest rates. There is a pretty good possibility of seeing a fair amount of volatility in the markets and likely mortgage rates the next several days.

The first report of the week is August’s Industrial Production data tomorrow morning. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could cause movement in mortgage rates. Analysts are currently expecting to see a 0.3% decline in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure should help push rates slightly lower.

August’s Consumer Price Ind ex (CPI) will be released Tuesday morning at 8:30 am ET. The CPI is one of the most important reports we see each and every month. It is considered to be a key indicator of inflation at the consumer level of the economy. There are two readings in the report- the overall index and the core data reading. Current forecasts are calling for no change in the overall reading and a 0.2% rise in the core data reading. A larger increase in the core data would likely lead to higher mortgage rates Tuesday, while a smaller increase would be good news.

The FOMC meeting will adjourn at 2:15 PM Tuesday. There is little debate about a possible change to key short-term interest rates at this meeting. The overwhelming consensus is that there will be no change to rates at this meeting. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find the Fed’s expected next move. The wild card is how the ma rkets react to the statement. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates Tuesday afternoon and Wednesday morning.

August’s Housing Starts report will be released early Wednesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets.

Late Thursday morning, the Conference Board will release its Leading Economic Indicators (LEI). This index attempts to measure economic activity over the next three to six months. If it estimates an increase in activity, the bond market will probably fall and mortgage rates will rise slightly. If it shows weaker than expected readings, the bond market may rally and mortgage rates should fall. Current forecasts are calling for a 0.2% decline from July’s reading.

Overall, I expect to see some pressure in bonds tomorrow as investors prepare for Tuesday’s events. Tuesday will most likely be the most important day of the week with the CPI release and the FOMC meeting. If the CPI eases inflation concerns and the Fed statement doesn’t reveal any negative surprises, we will most likely see mortgage rates move lower for the week.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 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 all/any other borrowers.

Tags: bond, core data, cpi, federal open market committee, fomc meeting, key indicator of inflation, LEI, manufacturing sector, mortgage rates, open market committee, overwhelming consensus, term interest, Tuesday, tuesday morning, U.S., week