Mortgage Rates Start Week Better, the Week Ahead
Posted 04-26-2010 at 08:29 AM by VictorBurek
Last week ended on a positive note for mortgage rate watchers. The prices of mortgage backed securities, following a lower open, managed to crawl higher by the closing bell. The late day improvements led to a few lenders repricing better, but typical for a Friday, most lenders left rate sheets unchanged on the day. If you followed my advice on floating over the weekend, you will be rewarded with better rate sheets this morning.
The only relevant event taking place today is the first round of a record supply of Treasuries being offered at auction. At 1pm eastern, the Department of Treasury will announce the results of today’s $11billion auction of 5 year TIPS. Strong demand could set the tone for the week as our government looks to borrow $129billion. We get another $44billion of 2 year notes on Tuesday, $42billion of 5 year notes on Wednesday and $32billion of 7 year notes on Thursday. Weak demand for our nation’s debt, could pressure mortgage rates higher this week.
Here are the highlights for the week ahead:
Tuesday
- Consumer Confidence (medium impact) An optimistic consumer is more likely to spend money which benefits the stock market, while a pessimistic consumer is more likely to save which benefits the bond market.
- FOMC Meeting begins. The Federal Open Market Committee meets 8 times a year to set our nation’s monetary policy. If economic growth is weak, the FOMC can lower interest rates to give the economy a jolt, but in times of a heated economy which leads to inflation, the FOMC raises rates to slow down economic activity. These meetings are typically for 2 days and at the end of the second day they release a statement where they announce any changes to current monetary policy and give an outlook on the economy.
Wednesday
- MBA Weekly Applications Index (low impact)
- FOMC Meeting Announcement (high impact).. If the statement gives any hint of inflationary concerns, mortgage rates will be pressured higher.
Thursday
- Jobless Claims (medium impact)
Friday
- Gross Domestic Product (high impact) This is the first reading for quarter 1 growth. - Chicago PMI (low to medium impact)
- Consumer Sentiment (medium impact)
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from last week. The par 30 year conventional rate mortgage remains 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. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
When evaluating the risk/reward of floating, you have very little to gain by floating and a lot to risk. We have several high impacting events taking place this week which could pressure mortgage rates higher very quickly. MBS are moving higher this morning and we are close to the highs of the range which has held firm for quite some time but we are not at the price highs which trigger my lock alert. Let’s start the week cautiously floating for the day. If you wish to remove all risk, go ahead and look into locking later today. This is a conservative approach, but it is better to lock when you should have floated than it is to float when you should have locked.
The only relevant event taking place today is the first round of a record supply of Treasuries being offered at auction. At 1pm eastern, the Department of Treasury will announce the results of today’s $11billion auction of 5 year TIPS. Strong demand could set the tone for the week as our government looks to borrow $129billion. We get another $44billion of 2 year notes on Tuesday, $42billion of 5 year notes on Wednesday and $32billion of 7 year notes on Thursday. Weak demand for our nation’s debt, could pressure mortgage rates higher this week.
Here are the highlights for the week ahead:
Tuesday
- Consumer Confidence (medium impact) An optimistic consumer is more likely to spend money which benefits the stock market, while a pessimistic consumer is more likely to save which benefits the bond market.
- FOMC Meeting begins. The Federal Open Market Committee meets 8 times a year to set our nation’s monetary policy. If economic growth is weak, the FOMC can lower interest rates to give the economy a jolt, but in times of a heated economy which leads to inflation, the FOMC raises rates to slow down economic activity. These meetings are typically for 2 days and at the end of the second day they release a statement where they announce any changes to current monetary policy and give an outlook on the economy.
Wednesday
- MBA Weekly Applications Index (low impact)
- FOMC Meeting Announcement (high impact).. If the statement gives any hint of inflationary concerns, mortgage rates will be pressured higher.
Thursday
- Jobless Claims (medium impact)
Friday
- Gross Domestic Product (high impact) This is the first reading for quarter 1 growth. - Chicago PMI (low to medium impact)
- Consumer Sentiment (medium impact)
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from last week. The par 30 year conventional rate mortgage remains 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. You may elect to pay less in closing costs but you will have to accept a higher interest rate.
When evaluating the risk/reward of floating, you have very little to gain by floating and a lot to risk. We have several high impacting events taking place this week which could pressure mortgage rates higher very quickly. MBS are moving higher this morning and we are close to the highs of the range which has held firm for quite some time but we are not at the price highs which trigger my lock alert. Let’s start the week cautiously floating for the day. If you wish to remove all risk, go ahead and look into locking later today. This is a conservative approach, but it is better to lock when you should have floated than it is to float when you should have locked.
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