Daily Mortgage Rate Lock Advisory

Rate Lock Advisory – Wednesday Mar. 18th

WEDNESDAY AFTERNOON UPDATE:

This week’s FOMC meeting has adjourned with some extremely favorable news regarding the Fed’s investment in Treasury securities and mortgage-related bonds. As expected, there was no change made to key short-term interest rates but the post-meeting statement did mention that economic conditions were worse now than at the time of their last meeting in January. They again mentioned concerns about deflation, meaning inflation is not a threat in their minds.

The big news was the size of the investment that the Fed is going to be making in mortgage-related bonds and securities. In a direct effort to push different interest rates lower, including corporate lending and residential mortgage rates, the central bank will be buying up to $300 billion in longer-term bonds over the next six months. They also said that they plan to purchase $750 billion in mortgage backed securities so free up more capital for mortgage lending. T his will likely give the housing and mortgage sectors a much needed boost.

The effect this news had on today’s trading was extremely positive for mortgage shoppers. The stock markets have rebounded with the Dow up approximately 50 points and the Nasdaq up 25 points. Both indexes were well in negative territory this morning. The bond market has had an even better reaction to the news. It is currently up a whopping 4 7/32 (135/32) to drive its yield lower by .47%. That is a huge swing and should equate to a very significant improvement to mortgage rates shortly.

Earlier today, the Labor Department gave us the week’s most important economic data with the release of February’s Consumer Price Index (CPI). It showed a 0.4% rise in the overall reading and a 0.2% increase in the core data reading. Both readings were slightly stronger than expected, indicating prices at the consumer level of the economy were higher than thought. While that is bad news fo r bonds and mortgage rates because inflation erodes the value of a bond’s future fixed interest payments, the market downplayed the data in this morning’s trading, looking forward to this afternoon’s FOMC results.

The Conference Board will post its Leading Economic Indicators (LEI) for February late tomorrow morning, but I suspect that today’s rally and news will carry into tomorrow’s morning trading and influence rates more than this report will. The LEI attempts to measure economic activity over the next three to six months. Current forecasts are calling for a 0.6% decline, indicating that economic activity will likely slow in the coming weeks. That would be good news for the bond market and mortgage rates generally speaking, but today’s news will probably dominate trading tomorrow regardless of the results of the LEI.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my clos ing 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.
©Mortgage Commentary 2009

Rate Lock Advisory – Tuesday Nov. 25th

Tuesday’s bond market has opened sharply higher following more bailout news from the Fed that is being received as very favorable for bonds and mortgage rates. The stock markets are in negative territory with the Dow down 5 points and the Nasdaq down 18 points. The bond market is currently up 50/32, which will likely improve this morning’s mortgage rates by approximately .750 of a discount point over yesterday’s rates.

There were two important pieces of economic data released this morning, giving us mixed results. The first revision to the 3rd Quarter Gross Domestic Product (GDP) came in at ?0.5%, which was close to latest forecasts. This means that economic activity during the 3rd quarter was weaker than analysts had predicted last month but close to their latest projections. Accordingly, this data has not had much of an impact on this morning’s mortgage rates.

November’s Consumer Confidence Index (CCI) was also released this morning, showing a reading of 44.9. This was much higher than the 39.5 reading that was expected, indicating that consumers were more optimistic about their own financial situations than many had thought. This is considered negative news for bonds and mortgage rates because rising confidence usually means consumers are more apt to make large purchases in the near future.

Today’s news from the Fed amounts to a more direct support of the mortgage market than the previous moves. In short, the Fed is going to pump $600 billion directly into mortgage lending that should significantly increase cash flow to make new loans to homeowners and homebuyers. The previous announcements were directed more at shoring up the banking side of financial system and somewhat ignored the mortgage side. Today’s news is being considered great for future mortgage activity, and therefore, hopefully will help stabilize home prices.

There are four important reports scheduled to be posted tomorrow morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items. It is expected to show a 2.5% drop in new orders. A larger decline would be good news for the bond market and mortgage rates.

The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. It is expected to show that income rose 0.1% and that spending fell 0.7%. Smaller than expected readings would be good news for bonds and could lead to improvements in mortgage rates.

The revised November reading to the University of Michigan Index of Consumer Sentiment will also be posted late tomorrow morning. Analysts are expecting to see little change to the preliminary reading of 57.9. Unless we see a significant variance from the forecasted reading, I don’ t think this data will cause much movement in mortgage rates tomorrow.

The fourth is October’s New Home Sales, but I don’t expect it to have any impact on the bond or mortgage markets. Keep in mind that the bond market will close early tomorrow ahead of the Thanksgiving Day holiday, so we may see additional volatility as traders protect themselves over the long weekend. Many traders will by keeping a skeleton staff Friday, meaning tomorrow is really the last relevant trading day until Monday 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… 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.