Mortgage Rates Steady, Data Picks Up Today
Posted 03-03-2010 at 08:09 AM by VictorBurek
Early morning weakness in the bond market led to worse lender rate sheets yesterday morning when compared to Monday’s. Just around noon, the fixed income sector went on a mini rally recapturing all the morning losses. As the price gains held until close, most lenders did reprice for the better bringing rates back to the best levels of the year.
Following yesterday’s data free day, the economic reports picked up this morning. First out this morning was the weekly Mortgage Bankers’ Associations Applications Index. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
Recent reports from the MBA have indicated demand for mortgages to be declining as many home owners have already refinanced and taken advantage of the low interest rates offered last year. Despite the continuance of government stimulus for home buyers, the purchase market has been slow as well. Today’s release indicated demand rebounding considerably during the week of February 26. Leading the way was the refinance activity which posted a weekly gain of 17.2% while purchase activity moved higher by 9%. Recent reports on housing sales have been quite disappointing so today’s report might indicate better news to come for the troubled housing sector.
Next out this morning was the ADP Employment Report which gives us a sneak peek into the health of the labor market ahead of the official government data due out on Friday. Historically, the ADP report has varied greatly from the official report but its accuracy has been improving lately. The biggest difference between the two jobs report is the ADP numbers do not take into account government hiring, only the private sector. Since our economy is driven by consumer spending, higher unemployment would indicate less consumer demand and spending which isn’t good for corporate profits. Investors tend to sell stocks when unemployment is high in favor of the safety of the fixed income sector.
The report indicated that private payrolls cut 20,000 jobs last month matching economists’ expectations. Last month’s report was revised worse from a first reported loss of 22,000 to a much larger loss of 60,000 jobs! With the preview over, market participants will await the official government report due out Friday morning. Economists are expecting a loss of 50,000 jobs following last month’s report which indicated a loss of only 20,000. The unemployment rate is expected to move higher from 9.7% to 9.8%.
Also released today was a report on the strength of the non-manufacturing sector of our economy with the ISM Non-Manufacturing Index. The Institute for Supply Management(ISM) surveys 400 firms including mining, construction, retail, etc… on the strength of business conditions. Readings above 50 indicate improving conditions while readings below 50 indicate contraction or worsening conditions. The last two reports have shown improving conditions with last month’s report coming in at 50.5 but less than what economists had expected. Today’s release is expected to show conditions improving further with a reading of 51.0.
The report indicated the non manufacturing sector of our economy improved much more than expected registering a 53.0 reading. Following the release of this report, MBS have moved lower which might force lenders to do an early morning reprice for the worse.
Later today, the Federal Reserve will release the “Beige Book”, called that simply due to the color of its cover. This data outlines economic conditions around the U.S. and is used as a point of reference during the FOMC meetings where our nation’s monetary policy is set. Much of the information contained within this data is already known. The prior Beige Book which was released on January 13, indicated the Fed was feeling much better about an economic stabilization but continued to be concerned about future growth indicating a slow road to recovery.
Like yesterday, early morning weakness in the MBS market has led to slightly worse rate sheets than the improved ones sent out late yesterday afternoon. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate on a conventional mortgage 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, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.
I still say you should be locking ahead of the employment report coming Friday. If the numbers are better than expected or post a positive monthly gain of jobs, rates will move higher and quickly. If the report comes in as expected or worse, I still feel rates will not move any lower than present levels. Nothing to gain, much to lose in my opinion.
Following yesterday’s data free day, the economic reports picked up this morning. First out this morning was the weekly Mortgage Bankers’ Associations Applications Index. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
Recent reports from the MBA have indicated demand for mortgages to be declining as many home owners have already refinanced and taken advantage of the low interest rates offered last year. Despite the continuance of government stimulus for home buyers, the purchase market has been slow as well. Today’s release indicated demand rebounding considerably during the week of February 26. Leading the way was the refinance activity which posted a weekly gain of 17.2% while purchase activity moved higher by 9%. Recent reports on housing sales have been quite disappointing so today’s report might indicate better news to come for the troubled housing sector.
Next out this morning was the ADP Employment Report which gives us a sneak peek into the health of the labor market ahead of the official government data due out on Friday. Historically, the ADP report has varied greatly from the official report but its accuracy has been improving lately. The biggest difference between the two jobs report is the ADP numbers do not take into account government hiring, only the private sector. Since our economy is driven by consumer spending, higher unemployment would indicate less consumer demand and spending which isn’t good for corporate profits. Investors tend to sell stocks when unemployment is high in favor of the safety of the fixed income sector.
The report indicated that private payrolls cut 20,000 jobs last month matching economists’ expectations. Last month’s report was revised worse from a first reported loss of 22,000 to a much larger loss of 60,000 jobs! With the preview over, market participants will await the official government report due out Friday morning. Economists are expecting a loss of 50,000 jobs following last month’s report which indicated a loss of only 20,000. The unemployment rate is expected to move higher from 9.7% to 9.8%.
Also released today was a report on the strength of the non-manufacturing sector of our economy with the ISM Non-Manufacturing Index. The Institute for Supply Management(ISM) surveys 400 firms including mining, construction, retail, etc… on the strength of business conditions. Readings above 50 indicate improving conditions while readings below 50 indicate contraction or worsening conditions. The last two reports have shown improving conditions with last month’s report coming in at 50.5 but less than what economists had expected. Today’s release is expected to show conditions improving further with a reading of 51.0.
The report indicated the non manufacturing sector of our economy improved much more than expected registering a 53.0 reading. Following the release of this report, MBS have moved lower which might force lenders to do an early morning reprice for the worse.
Later today, the Federal Reserve will release the “Beige Book”, called that simply due to the color of its cover. This data outlines economic conditions around the U.S. and is used as a point of reference during the FOMC meetings where our nation’s monetary policy is set. Much of the information contained within this data is already known. The prior Beige Book which was released on January 13, indicated the Fed was feeling much better about an economic stabilization but continued to be concerned about future growth indicating a slow road to recovery.
Like yesterday, early morning weakness in the MBS market has led to slightly worse rate sheets than the improved ones sent out late yesterday afternoon. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate on a conventional mortgage 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, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.
I still say you should be locking ahead of the employment report coming Friday. If the numbers are better than expected or post a positive monthly gain of jobs, rates will move higher and quickly. If the report comes in as expected or worse, I still feel rates will not move any lower than present levels. Nothing to gain, much to lose in my opinion.
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