Mortgage Rates Hold Near Record Low and the Week Ahead
Posted 11-30-2009 at 08:11 AM by VictorBurek
I hope everyone had a fantastic holiday weekend but now it’s back to work. Last week ended on a flat note with mortgage backed securities closing basically where they opened Friday morning. The volume was extremely light but that was expected as the markets were only open for a half day.
The data calendar is very light today with the only report being the Chicago PMI which is a survey of businesses conditions around the Chicago region. Readings above 50 indicate expansion while readings below 50 indicate contraction. Last month’s survey registered the first above 50 reading since the summer of 2008 with a reading of 54.2. Expectations call for this month’s report to come in slightly lower at 53.0. The release indicates that business conditions around Chicago continue to improve with a 56.1 reading. Despite this better than expected economic data, there wasn’t much reaction from the markets.
On Tuesday we get a measure of the strength of the manufacturing sector of our economy with the release of the Institute for Supply Management’s Manufacturing Index which is a survey of over 300 manufacturing firms. This data is similar to the Chicago PMI in that readings above 50 indicate growth while readings below 50 indicate contraction of conditions. Last month’s report indicated a 55.7 reading which is the highest reading since the middle of 2006. Economists surveyed are expecting a similar reading with this report. We also get Construction Spending from the Department of Commerce and Pending Home sales from the National Association of Realtors.
Wednesday we get the weekly Mortgage Bankers Association’s Application index which tracks the weekly changes in the amount of applications at major lenders for mortgages. This report will be followed by the ADP Employment report which is a private payroll companies look into the jobs sector. Friday we get the official government report on jobs. Lastly we get the Beige Book which is a report on economic conditions that is used at the Federal Open Market Committee meetings where our nation’s monetary policy is set. The book is called the Beige Book simply for the cover of its cover. This data is always released two weeks before the FOMC meetings and gives market participants a peek into what Fed officials use to set policy. Much of the information is this report is known in advance so it typically doesn’t have a huge impact on the markets.
On Thursday comes the weekly jobless claims numbers which are expected to show higher claims climbing to 485,000 from the prior week’s 466,000. At the same time we get the Productivity and Costs report which measures how efficient our work force is at producing our nation’s goods and services. A more productive workforce keeps wage pressure down which can benefit both stocks and bonds. Lastly, the U.S. Department of Treasury will announce another round of borrowing offering 3 year notes, 10 year notes and 30 year bonds to be auctioned next week.
The week wraps up with the single most important economic report we get on a monthly basis, the Employment Situation report. Since our economy is driven by consumer spending, market participants want to know how many Americans are out of work. Additionally, this data shows average hourly wage and workweek for Americans that are employed. Recent reports have shown our economy losing fewer and fewer jobs each month and this month’s report is expected to continue the trend showing a loss of only 100,000 jobs after the prior month’s loss of 190,000. At the height of the current recession, our economy was losing over 600,000 jobs each month. Average hourly earnings are expected to post a month over month gain of 0.2% while the average work week is expected to climb to 33.1 from 33.0 last month.
Early reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is holding in the 4.50% to 4.75% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, par rate is in the 4.00 to 4.25% range with similar costs.
As always when securing a mortgage, you can pay less in closing costs but you will not get as low an interest rate. Think of a See-Saw, the higher the costs, the lower the rate and vice versa. As a consumer you can choose to do a loan where you don’t pay the closing costs. This doesn’t mean there are none, just means you are not paying them. Those fees would be paid by the person doing the loan. How this is achieved is premium pricing which means you get a higher interest rate than par and the loan originator pays the fees for you from the money they made from the lender by giving you that higher interest rate. This is a excellent option for anyone not planning on keeping their home from many years. At the end of the day, whether you choose to pay the costs or not, you end up paying them one way or the other. You can pay them as costs up front or pay them over time with the higher interest rate.
The data calendar is very light today with the only report being the Chicago PMI which is a survey of businesses conditions around the Chicago region. Readings above 50 indicate expansion while readings below 50 indicate contraction. Last month’s survey registered the first above 50 reading since the summer of 2008 with a reading of 54.2. Expectations call for this month’s report to come in slightly lower at 53.0. The release indicates that business conditions around Chicago continue to improve with a 56.1 reading. Despite this better than expected economic data, there wasn’t much reaction from the markets.
On Tuesday we get a measure of the strength of the manufacturing sector of our economy with the release of the Institute for Supply Management’s Manufacturing Index which is a survey of over 300 manufacturing firms. This data is similar to the Chicago PMI in that readings above 50 indicate growth while readings below 50 indicate contraction of conditions. Last month’s report indicated a 55.7 reading which is the highest reading since the middle of 2006. Economists surveyed are expecting a similar reading with this report. We also get Construction Spending from the Department of Commerce and Pending Home sales from the National Association of Realtors.
Wednesday we get the weekly Mortgage Bankers Association’s Application index which tracks the weekly changes in the amount of applications at major lenders for mortgages. This report will be followed by the ADP Employment report which is a private payroll companies look into the jobs sector. Friday we get the official government report on jobs. Lastly we get the Beige Book which is a report on economic conditions that is used at the Federal Open Market Committee meetings where our nation’s monetary policy is set. The book is called the Beige Book simply for the cover of its cover. This data is always released two weeks before the FOMC meetings and gives market participants a peek into what Fed officials use to set policy. Much of the information is this report is known in advance so it typically doesn’t have a huge impact on the markets.
On Thursday comes the weekly jobless claims numbers which are expected to show higher claims climbing to 485,000 from the prior week’s 466,000. At the same time we get the Productivity and Costs report which measures how efficient our work force is at producing our nation’s goods and services. A more productive workforce keeps wage pressure down which can benefit both stocks and bonds. Lastly, the U.S. Department of Treasury will announce another round of borrowing offering 3 year notes, 10 year notes and 30 year bonds to be auctioned next week.
The week wraps up with the single most important economic report we get on a monthly basis, the Employment Situation report. Since our economy is driven by consumer spending, market participants want to know how many Americans are out of work. Additionally, this data shows average hourly wage and workweek for Americans that are employed. Recent reports have shown our economy losing fewer and fewer jobs each month and this month’s report is expected to continue the trend showing a loss of only 100,000 jobs after the prior month’s loss of 190,000. At the height of the current recession, our economy was losing over 600,000 jobs each month. Average hourly earnings are expected to post a month over month gain of 0.2% while the average work week is expected to climb to 33.1 from 33.0 last month.
Early reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is holding in the 4.50% to 4.75% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, par rate is in the 4.00 to 4.25% range with similar costs.
As always when securing a mortgage, you can pay less in closing costs but you will not get as low an interest rate. Think of a See-Saw, the higher the costs, the lower the rate and vice versa. As a consumer you can choose to do a loan where you don’t pay the closing costs. This doesn’t mean there are none, just means you are not paying them. Those fees would be paid by the person doing the loan. How this is achieved is premium pricing which means you get a higher interest rate than par and the loan originator pays the fees for you from the money they made from the lender by giving you that higher interest rate. This is a excellent option for anyone not planning on keeping their home from many years. At the end of the day, whether you choose to pay the costs or not, you end up paying them one way or the other. You can pay them as costs up front or pay them over time with the higher interest rate.
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