Mortgage Rates Rally to Best Level of 2010
Posted 06-22-2010 at 08:30 AM by VictorBurek
Yesterday began with equities rallying and mortgage rates moving higher thanks to a global stock market rally. As the day progressed, stocks here in the U.S. could not hold onto the gains and money flowed back into the fixed income sector leading benchmark treasuries yields lower and mortgage backed securities prices higher. By day’s end, MBS approached all time price highs which allowed all lenders to reprice better bringing mortgage rates back to the best levels of 2010.
We had no economic data yesterday and only one relevant report today…Existing Home Sales from the National Association of Realtors(NAR).
This data totals the number of existing homes, not new construction, in which a sale closed in the prior month. Many believe that until housing rebounds, it will be very difficult for our economy to sustain acceptable growth…this makes tracking home sales data much more important today than in past times. Today’s data is for the month of May, so the home buyer tax credit would have still be in affect which has helped to boost housing demand. Some believe that many home purchases were pulled sooner to take advantage of the stimulus robbing future housing demand which will make this report even more relevant in the months ahead. The prior two month’s posted strong gains with April hitting an annualized pace of 5.77million. Economists surveyed prior to the release of May’s numbers expected this trend to continue with an increase to an annualized pace of 6.20million.
The NAR reported existing home sales for May unexpectedly fell 2.2% to an annualized pace of only 5.66million…well short of economists’ expectations. Despite this very bad headline number, the rest of the report was positive for housing. The available supply of homes on the market fell to 3.89million. At the current sales pace it will take 8.3months to work through the current inventory which beats last month’s 8.4month pace, and the median home price increased 2.7% to $179,600. Tomorrow we get another look into the housing sector with the release of New Home Sales.
At 1pm the Department of Treasury will announce the results of today’s auction of $40billion of 2 year notes. The added supply of debt on the market can pressure treasury yields higher to attract demand. In a positive sign, today’s supply is $2billion less than the prior auction of similar securities indicating our government needs to borrow less money to meet their obligations. Hopefully this trend will continue. If demand is strong today, mortgage rates should be able to hold onto the recent gains, but if demand is weak mortgage rates will be pressured higher.
Finally, the Federal Open Market Committee begins their two day Monetary Policy Meeting today. These meetings occur eight times a year and are considered one of the most influential events for global financial markets. The findings of their meeting will be communicated tomorrow at 2:15pm. Mortgage rates will be listening for any changes in tone or economic guidance. If the Fed is feeling more optimistic about the economy or indicates inflationary concerns, it could push mortgage rates higher.
Reports from fellow mortgage professionals indicate lender rates sheets to be quite aggressive and the best ones of the year. The par 30 year conventional rate mortgage remains in the 4.50% to 4.75% range for well qualified consumers. We even have a couple lenders offering 4.375%! 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. For consumers keeping their home for less than three years, you should consider a no cost loan where you take a higher interest rate and the loan originator pays your closing costs for you. Today’s rate for a no cost loan is between 5.125% to 5.25%.
MBS hit an all time price high this morning and we are seeing the best rates sheets of 2010 and almost the best rates ever. I continue to favor locking all loans closing within 30 days as mortgage rates do not have much room to continue to improve and lenders continue to be unwilling to push par rates below 4.50%.
We had no economic data yesterday and only one relevant report today…Existing Home Sales from the National Association of Realtors(NAR).
This data totals the number of existing homes, not new construction, in which a sale closed in the prior month. Many believe that until housing rebounds, it will be very difficult for our economy to sustain acceptable growth…this makes tracking home sales data much more important today than in past times. Today’s data is for the month of May, so the home buyer tax credit would have still be in affect which has helped to boost housing demand. Some believe that many home purchases were pulled sooner to take advantage of the stimulus robbing future housing demand which will make this report even more relevant in the months ahead. The prior two month’s posted strong gains with April hitting an annualized pace of 5.77million. Economists surveyed prior to the release of May’s numbers expected this trend to continue with an increase to an annualized pace of 6.20million.
The NAR reported existing home sales for May unexpectedly fell 2.2% to an annualized pace of only 5.66million…well short of economists’ expectations. Despite this very bad headline number, the rest of the report was positive for housing. The available supply of homes on the market fell to 3.89million. At the current sales pace it will take 8.3months to work through the current inventory which beats last month’s 8.4month pace, and the median home price increased 2.7% to $179,600. Tomorrow we get another look into the housing sector with the release of New Home Sales.
At 1pm the Department of Treasury will announce the results of today’s auction of $40billion of 2 year notes. The added supply of debt on the market can pressure treasury yields higher to attract demand. In a positive sign, today’s supply is $2billion less than the prior auction of similar securities indicating our government needs to borrow less money to meet their obligations. Hopefully this trend will continue. If demand is strong today, mortgage rates should be able to hold onto the recent gains, but if demand is weak mortgage rates will be pressured higher.
Finally, the Federal Open Market Committee begins their two day Monetary Policy Meeting today. These meetings occur eight times a year and are considered one of the most influential events for global financial markets. The findings of their meeting will be communicated tomorrow at 2:15pm. Mortgage rates will be listening for any changes in tone or economic guidance. If the Fed is feeling more optimistic about the economy or indicates inflationary concerns, it could push mortgage rates higher.
Reports from fellow mortgage professionals indicate lender rates sheets to be quite aggressive and the best ones of the year. The par 30 year conventional rate mortgage remains in the 4.50% to 4.75% range for well qualified consumers. We even have a couple lenders offering 4.375%! 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. For consumers keeping their home for less than three years, you should consider a no cost loan where you take a higher interest rate and the loan originator pays your closing costs for you. Today’s rate for a no cost loan is between 5.125% to 5.25%.
MBS hit an all time price high this morning and we are seeing the best rates sheets of 2010 and almost the best rates ever. I continue to favor locking all loans closing within 30 days as mortgage rates do not have much room to continue to improve and lenders continue to be unwilling to push par rates below 4.50%.
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