Mortgage Rates Continue To Hold At Best Levels of 2010…Still Locking
Posted 05-13-2010 at 07:54 AM by VictorBurek
We had a very uneventful day in the fixed income markets yesterday as mortgage rates held steady at 2010 lows. Both benchmark treasuries and mortgage backed securities traded in a tight range and ended the day relatively flat… much like what happened on Tuesday. The lack of volatility and price movement allowed lenders to keep rate sheets unchanged on the day.
We had a couple economic reports released at 8:30am eastern this morning.
The Department of Labor released the weekly jobless claims. This data provides three measures on the health of the labor market:
1. Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Since our economy is driven by consumer spending, economists track employment data to get a sense of future economic momentum. Higher jobless claims lead to less consumer spending, which is bad for the overall economy but generally helpful in keeping mortgage rates from rising. The recent trend has indicated the labor market to be improving with last week being the third consecutive week of lower initial claims, but the number of Americans who have been without a job for more than 27 weeks remains at very high levels.
The report showed that initial claims, for the week ending May 8, fell 4000 to 444,000 for the fourth consecutive weekly decline but slightly higher than the 440,000 that was expected. The prior week’s number was revised higher from the first reported 444,000 to 448,000. Continued claims rose 12,000 to 4.63million also higher than the 4.57million that was expected. The number of Americans who are collecting Emergency and Extended Benefits fell by about 200,000 to 5.36million.
Released at the same time was Import and Export prices which gives us a read on inflation. Today’s report showed that the prices of items we import rose 0.9% in April, higher than the 0.8% that was expected while the prices of exported items increased 1.2%. Higher export prices reduces foreign demand for our products as they search for a lower price from other countries which is not good for our overall economy. With the sovereign debt concerns overseas, the US dollar has strengthened considerably over the last few weeks which will continue to pressure export prices higher. This report is not nearly as important as the Consumer Price Index or the Personal Consumption Expenditure reports which do show inflation to be in check. The CPI report will be released next week.
At 1pm eastern, the Department of Treasury will release the results of today’s $16billion 30 year bond auction. Tuesday’s 3 year auction went very well but yesterday’s 10 year auction saw slightly lower demand than the previous 5 auctions but still went well enough to hold yields steady. If demand at today’s auction is poor, mortgage rates will come under pressure to move higher. Matt and AQ will cover the results once they are released on the MBS Commentary blog.
Reports from fellow mortgage professionals indicate lender rates sheets to be very similar to yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par 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 looking to access equity in your home, you should expect higher costs or a slightly higher interest rate.
With rates at the best levels of the year, I continue to advise locking all loans closing within 30 days and also encourage you to consider longer term locks if your loan is closing beyond 30 days. I see very little chance of rates moving lower and a very high chance of rates edging higher.
We had a couple economic reports released at 8:30am eastern this morning.
The Department of Labor released the weekly jobless claims. This data provides three measures on the health of the labor market:
1. Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits
2. Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
3. Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Since our economy is driven by consumer spending, economists track employment data to get a sense of future economic momentum. Higher jobless claims lead to less consumer spending, which is bad for the overall economy but generally helpful in keeping mortgage rates from rising. The recent trend has indicated the labor market to be improving with last week being the third consecutive week of lower initial claims, but the number of Americans who have been without a job for more than 27 weeks remains at very high levels.
The report showed that initial claims, for the week ending May 8, fell 4000 to 444,000 for the fourth consecutive weekly decline but slightly higher than the 440,000 that was expected. The prior week’s number was revised higher from the first reported 444,000 to 448,000. Continued claims rose 12,000 to 4.63million also higher than the 4.57million that was expected. The number of Americans who are collecting Emergency and Extended Benefits fell by about 200,000 to 5.36million.
Released at the same time was Import and Export prices which gives us a read on inflation. Today’s report showed that the prices of items we import rose 0.9% in April, higher than the 0.8% that was expected while the prices of exported items increased 1.2%. Higher export prices reduces foreign demand for our products as they search for a lower price from other countries which is not good for our overall economy. With the sovereign debt concerns overseas, the US dollar has strengthened considerably over the last few weeks which will continue to pressure export prices higher. This report is not nearly as important as the Consumer Price Index or the Personal Consumption Expenditure reports which do show inflation to be in check. The CPI report will be released next week.
At 1pm eastern, the Department of Treasury will release the results of today’s $16billion 30 year bond auction. Tuesday’s 3 year auction went very well but yesterday’s 10 year auction saw slightly lower demand than the previous 5 auctions but still went well enough to hold yields steady. If demand at today’s auction is poor, mortgage rates will come under pressure to move higher. Matt and AQ will cover the results once they are released on the MBS Commentary blog.
Reports from fellow mortgage professionals indicate lender rates sheets to be very similar to yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par 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 looking to access equity in your home, you should expect higher costs or a slightly higher interest rate.
With rates at the best levels of the year, I continue to advise locking all loans closing within 30 days and also encourage you to consider longer term locks if your loan is closing beyond 30 days. I see very little chance of rates moving lower and a very high chance of rates edging higher.
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