Mortgage Rates Improve Post FOMC
Mortgage rates managed to improve slightly following the conclusion of the FOMC meeting. The statement which was released at 2:15pm eastern didn’t hold any surprises. The Fed continued to say they expect the current Fed Fund rate to remain at current levels for an “extended period”. They also mentioned that inflation expectations remain subdued and economic growth will remain slow and sluggish but there has been an improvement in the labor market. Several lenders did reprice for the better increasing rebate which lowers consumer borrowing costs.
We do have some economic data hitting the newswires this morning. First the Department of Labor released the weekly jobless claims. This data totals the number of Americans that filed for first time unemployment benefits in the prior week. Included within this report is continuing claims which totals the number of Americans that continue to file for benefits due to a lack of finding a new job. A new part of the report is extended benefits. Under the current administration, unemployment benefits have been extended by 13 weeks for Americans that cannot find a new job beyond the traditional benefits.
The report showed that more Americans than expected filed first time claims last week indicating that the labor market is still weak. After posting 5 weeks of improvement, jobless claims have taken a turn for the worse with the second week in a row of higher claims. Initial claims rose by 7000 to 480,000 vs expectations for 465,000. Continuing claims rose by 5000 to 5.186million also higher than the 5.15million that was expected. Americans filing for extending benefits increased by 144,000 to 4.73million. With continuing claims and extended benefits, we still have over 10million Americans filing for unemployment benefits! Since our economy is driven by consumer spending, higher unemployment claims usually benefits the bond market as less spending will lead to lower corporate profits which is bad for stocks.
The next piece of data comes from the Conference Board with the release of Leading Indicators. This report is a composite index of 10 economic indicators that should lead to overall economic activity. If the month over month change is positive, it indicates that the economy is improving. The majority of the components have been reported earlier in the month so this report doesn’t really give us new information about the economy. The release indicated that Leading Indicators moved higher than expected with a month over month improvement of 0.9% vs 0.7% expected.
The final report for the week gives us a measure on the strength of manufacturing in the Philadelphia region. The Philly Fed Survey gives market participants a detailed look at the manufacturing sector and how busy it will be. Readings above 0 indicate improving conditions while readings below 0 indicate contraction. Recent readings from this survey have shown manufacturing conditions improving. November’s reading rose to 16.7 from 11.5 in October. Expectations for this month’s report call for a slight pull back to 16.5. The report indicated that manufacturing conditions improved more than expected to 20.4! Despite this better than expected economic data, MBS continue to hold onto gains but have moved off the highs of the day.
Dallas Federal Reserve Bank President Richard Fisher is speaking to the Little Rock Regional Chamber of Commerce on the global economy. Anytime Fed officials or voting members of the FOMC speak, market participants pay attention for any hint at future monetary policy and their outlook on the economy. Since the Fed statement was released yesterday, I suspect that no surprises will come from his speech, but his words can move the markets.
Reports from fellow mortgage professionals indicate mortgage rates have declined from yesterday. The par 30 year conventional rate mortgage is now in the 4.75% to 5.00% 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.
I advised yesterday that if you are a risk taker that floating could pay off, well it did. We are seeing better rate sheets this morning and the day is heading in the right direction(for mortgage rates). Stock market has opened lower resulting in the flow of money into the fixed income sector. My advice is to continue to float but always evaluate your position at day’s end. If you are happy with the rate you can lock or you cannot afford the rate to move higher, go ahead and lock as it is best to be safe than sorry.
We do have some economic data hitting the newswires this morning. First the Department of Labor released the weekly jobless claims. This data totals the number of Americans that filed for first time unemployment benefits in the prior week. Included within this report is continuing claims which totals the number of Americans that continue to file for benefits due to a lack of finding a new job. A new part of the report is extended benefits. Under the current administration, unemployment benefits have been extended by 13 weeks for Americans that cannot find a new job beyond the traditional benefits.
The report showed that more Americans than expected filed first time claims last week indicating that the labor market is still weak. After posting 5 weeks of improvement, jobless claims have taken a turn for the worse with the second week in a row of higher claims. Initial claims rose by 7000 to 480,000 vs expectations for 465,000. Continuing claims rose by 5000 to 5.186million also higher than the 5.15million that was expected. Americans filing for extending benefits increased by 144,000 to 4.73million. With continuing claims and extended benefits, we still have over 10million Americans filing for unemployment benefits! Since our economy is driven by consumer spending, higher unemployment claims usually benefits the bond market as less spending will lead to lower corporate profits which is bad for stocks.
The next piece of data comes from the Conference Board with the release of Leading Indicators. This report is a composite index of 10 economic indicators that should lead to overall economic activity. If the month over month change is positive, it indicates that the economy is improving. The majority of the components have been reported earlier in the month so this report doesn’t really give us new information about the economy. The release indicated that Leading Indicators moved higher than expected with a month over month improvement of 0.9% vs 0.7% expected.
The final report for the week gives us a measure on the strength of manufacturing in the Philadelphia region. The Philly Fed Survey gives market participants a detailed look at the manufacturing sector and how busy it will be. Readings above 0 indicate improving conditions while readings below 0 indicate contraction. Recent readings from this survey have shown manufacturing conditions improving. November’s reading rose to 16.7 from 11.5 in October. Expectations for this month’s report call for a slight pull back to 16.5. The report indicated that manufacturing conditions improved more than expected to 20.4! Despite this better than expected economic data, MBS continue to hold onto gains but have moved off the highs of the day.
Dallas Federal Reserve Bank President Richard Fisher is speaking to the Little Rock Regional Chamber of Commerce on the global economy. Anytime Fed officials or voting members of the FOMC speak, market participants pay attention for any hint at future monetary policy and their outlook on the economy. Since the Fed statement was released yesterday, I suspect that no surprises will come from his speech, but his words can move the markets.
Reports from fellow mortgage professionals indicate mortgage rates have declined from yesterday. The par 30 year conventional rate mortgage is now in the 4.75% to 5.00% 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.
I advised yesterday that if you are a risk taker that floating could pay off, well it did. We are seeing better rate sheets this morning and the day is heading in the right direction(for mortgage rates). Stock market has opened lower resulting in the flow of money into the fixed income sector. My advice is to continue to float but always evaluate your position at day’s end. If you are happy with the rate you can lock or you cannot afford the rate to move higher, go ahead and lock as it is best to be safe than sorry.
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MBS continue to move higher. Most lenders have already repriced better today.Posted 12-17-2009 at 01:24 PM by VictorBurek
