Mortgage Rates Steady, The Week Ahead

Mortgage rates ended last week at the lowest levels since the Fed exited the mortgage backed securities market. If you recall, the Fed spent $1.25trillion on MBS with the program ending March 31st. Following their exit, mortgage rates briefly moved higher during the first week of April, but have since recovered much of the losses. Following a lower open on Friday, MBS managed to rally in afternoon trading leading to a few lenders repricing better as the gains held until close.

There are no major economic data releases scheduled for today. Typically on days with no data, the stock market has a greater impact on the bond market. If stocks can move higher today, I would expect some downward pressure on MBS which can lead to higher mortgage rates. If stocks sell off, there is a very good chance of continued improvement with MBS. We are heading into corporate earnings season where companies announce how much money they made or lost. Strong earnings and forecasts could lead to a stock market rally at the expense of bonds. Earnings season kicks off today after the closing bell with Alcoa reporting.

Here are the highlights for the rest of the week:

Tuesday
- International Trade (medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
- Import and Export Prices (low to medium impact)

Wednesday
- Weekly MBS Applications Index (low impact)
- Consumer Price Index, measures inflation on the consumer level (high impact)
- Retail Sales (high impact) If sales figures are strong, that is a sign of economic expansion which will pressure mortgage rates higher. As a general rule, positive economic news is bad for mortgage rates while bad economic news is good for mortgage rates.
- Beige Book, This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. (medium impact)

Thursday
- Weekly Jobless claims (medium impact)
- Empire State Manufacturing Survey (medium impact)
- Industrial Production, which is a measure of the strength of the manufacturing sector by measuring the output at U.S. factories, utilities and mines. Higher industrial production would be a positive economic indicator which would benefit the stock market at the expense of the fixed income sector. (high impact)
- Philadelphia Fed Survey (low impact)

Friday
- Housing Starts which estimates how much new residential real estate construction occurred in the previous month. (medium to high impact)
- Consumer Sentiment (medium impact)

Reports from fellow mortgage professionals indicate lender rate sheets to be similar to Friday’s. The par 30 year conventional rate mortgage is holding in the 4.875% to 5.125% 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. For consumers with lower FICO scores and higher loan to values, you should consider a government FHA loan. FHA loans have similar rates to conventional loans but do come with higher costs.

If you floated over the weekend, lets continue to float. There is room for rates to continue to improve but do not expect rates to move much lower. If you can lock today at 4.875%, nothing wrong with locking. If you can tolerate some risk, I feel floating day to day is the way to go.