quarter point

Daily Rate Lock Recommendation – 04/30/2008 12:16:00 PM EST

Rate Lock Advisory – Wednesday Apr. 30th

Wednesday’s bond market has opened up slightly after this morning’s economic data failed to give us any surprises. The stock markets are posting gains with the Dow up 98 points and the Nasdaq up 14 points. The bond market is currently up 3/32, which will likely keep this morning’s mortgage rates close to yesterday’s levels.

Today’s big report was the initial reading to the 1st Quarter Gross Domestic Product (GDP). It showed that the economy grew at a 0.6% annual pace. This was slightly stronger than expected, but not enough to create concern in bonds. Offsetting that reading was a key inflation reading in the data that came in lower than expected. The result was this report having little impact on today’s bond market or mortgage rates.

The second report posted this morning was the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. It revealed a 0.7% increase that was slightly weaker than expected. This is good news for bonds and mortgage rates, however, traders seem to be waiting for this afternoon’s events before making any adjustments to their holdings.

This week’s FOMC meeting will adjourn 2:15 PM ET this afternoon. It is expected to yield a quarter point cut to key short-term interest rates. Assuming the Fed does make that move, the post meeting statement will be watched closely for any indication of the Fed’s next move, or a lack of one. There is some debate about whether the Fed will continue to cut rates or if they will go into a holding pattern due to concern about inflation.

I suspect that the post meeting statement is going to have some verbiage about inflation that will cause concern in the bond market. Accordingly, I am shifting to a lock recommendation for immediate and short-term periods. But, if this is a false alarm, I will be shifting back to a float recommendation this afternoon. Look for an update to this report shortly after the markets have a chance to react to the FOMC meeting results.

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.