Mortgage Rates Rally Continues…Leaning Toward Locking in Gains
Posted 04-13-2010 at 08:05 AM by VictorBurek
Mortgage rates rallied again yesterday. There appears to be no main reason for the rally in the fixed income sector. It may be in anticipation of bad corporate earnings season, dovish comments from Fed officials, or just a correction from falling to much… who knows but at the end of the day we’ll take the rally. Alcoa, the first to report earnings this season, disappointed the markets falling short on total revenue but matched on earnings per share. All lenders did reprice better with some sending out multiple reprices for the better.
We did have two economic reports released this morning at 8:30am eastern.
First is the International Trade data. The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports. The report indicated that our trade deficit widened more than expected in February to -$39.7billion from a revised -$37billion in January. Exports rose to the highest level since October 2008 posting a monthly gain of 0.2%. Imports rose by 1.7% as more Americans have begun to spend increasing demand for foreign made products.
We also got a reading on inflation with the release of Import/Export prices. This report is not as important as the Consumer Price Index which come out tomorrow. Today’s report showed prices of items we export and import both rose 0.7% last month, less than the 1% increase economists had expected. This follows last month’s report which indicated export prices fell 0.5% and import prices fell 0.3% for the first month over month decline in import prices in 7 months. The main cause of the higher import prices was a 4% increase in the price of imported oil which accounted for about 80% of the month over month increase. Tomorrow’s CPI report is expected to show a 0.1% increase for the headline and the core reading.
Following the release of these two reports, MBS have continued to move higher which should allow lenders to offer better rate sheets this morning.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved this morning. The par 30 year conventional rate mortgage is still in the 4.875% to 5.125% range for well qualified consumers. There are a few lenders offering 4.75% this morning. 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. You may elect to pay less in closing costs, but you will have to accept a higher interest rate. 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 definitely favor locking this morning. MBS have rallied quite a bit over the last few days and if you have been floating you have seen your interest rate drop by .25% to .375%. When MBS fell dramatically in price about two weeks ago, I stated that they were due for a correction. Well, it works in the other direction as well. MBS have risen in price and profit taking might begin. I have stated many times in the past, lock the price highs and float the price lows. MBS are at the price highs of what I feel is the current range and yes they can move higher but I still favor locking in today and taking advantage of the recent price gains. For MBS to continue to rally we need either a fundamental shift in economic outlook or the Fed to reenter the MBS market which I find to be very unlikely.
We did have two economic reports released this morning at 8:30am eastern.
First is the International Trade data. The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports. The report indicated that our trade deficit widened more than expected in February to -$39.7billion from a revised -$37billion in January. Exports rose to the highest level since October 2008 posting a monthly gain of 0.2%. Imports rose by 1.7% as more Americans have begun to spend increasing demand for foreign made products.
We also got a reading on inflation with the release of Import/Export prices. This report is not as important as the Consumer Price Index which come out tomorrow. Today’s report showed prices of items we export and import both rose 0.7% last month, less than the 1% increase economists had expected. This follows last month’s report which indicated export prices fell 0.5% and import prices fell 0.3% for the first month over month decline in import prices in 7 months. The main cause of the higher import prices was a 4% increase in the price of imported oil which accounted for about 80% of the month over month increase. Tomorrow’s CPI report is expected to show a 0.1% increase for the headline and the core reading.
Following the release of these two reports, MBS have continued to move higher which should allow lenders to offer better rate sheets this morning.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved this morning. The par 30 year conventional rate mortgage is still in the 4.875% to 5.125% range for well qualified consumers. There are a few lenders offering 4.75% this morning. 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. You may elect to pay less in closing costs, but you will have to accept a higher interest rate. 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 definitely favor locking this morning. MBS have rallied quite a bit over the last few days and if you have been floating you have seen your interest rate drop by .25% to .375%. When MBS fell dramatically in price about two weeks ago, I stated that they were due for a correction. Well, it works in the other direction as well. MBS have risen in price and profit taking might begin. I have stated many times in the past, lock the price highs and float the price lows. MBS are at the price highs of what I feel is the current range and yes they can move higher but I still favor locking in today and taking advantage of the recent price gains. For MBS to continue to rally we need either a fundamental shift in economic outlook or the Fed to reenter the MBS market which I find to be very unlikely.
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