Another Rally Pushes Mortgage Rates to New All Time Lows
Posted 06-29-2010 at 08:24 AM by VictorBurek
Rates are ridiculously low and going lower. When rate sheets were issued yesterday morning, lenders were quite aggressive with their pricing offering rates matching the best level of 2010. Following the economic data which gave us mixed results, stocks started to move lower and mortgage backed securities started to rally. As they moved higher in price, reaching levels never seen, lenders did reprice for the better bringing consumer borrowing costs to the best level ever.
We have a couple economic reports to digest this morning.
First out was the S&P/Case Shiller Home Price Index. This data tracks the monthly change in the value of residential real estate across the U.S. During periods of rising home values, home owners are more likely to spend money as they see the value of their largest asset moving higher. In contrast, during periods of declining home values, home owners are much more likely to save money to offset the losses in home equity. Many economists believe that until home prices fully stabilize it will be extremely difficult for our economy to sustain growth. This makes tracking home sales data much more important than usual.
This morning’s release gave us good news on housing indicating home prices rose in April more than expected month over month and year over year. The 20 city index posted a monthly gain of 0.4% beating expectations of a 0.1% drop. Year over year, home prices rose 3.8% beating expectations of only 3.4%. This is the biggest gain in home prices year over year since September 2006! The biggest gainer was San Francisco which posted a 18% gain from last year. On the other hand was Las Vegas which posted the largest year over year decline of 8.5%. This is the final Home Price Index with the home buyer tax credit in effect.
Our final scheduled economic release of the day gave us a measure on how consumers are feeling: Consumer Confidence. This is a survey conducted by the Conference Board, they ask consumers questions about their present economic attitude and expectations of future economic conditions. Since our economy is driven by consumer spending, market participants track consumer confidence to get a gauge on how the consumer is feeling. An optimistic consumer is much more likely to spend money which benefits the stock market while a pessimistic consumer is more likely to save or pay off debt which benefits the fixed income sector.
Last month’s report on consumer confidence came in at the highest level since early 2008 indicating the American consumer is more confident in our economic recovery. Today’s report was quite the turnaround. June consumer confidence plunges from 63.3 in May to 52.9 far short of expectations. On the news, stocks have moved lower and MBS are moving higher.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved once again. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. There are a couple lenders offering 4.25% but you will have to pay a little extra. 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 1 point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 3.75% to 4.00% range with similar costs but lower FICO score requirements.
It seems almost every day we are getting a new record low mortgage rate. The main reason for mortgage rates falling lately is concern that the global economy may be heading toward a double dip recession… basically our economic recovery here and abroad is being called into question. If you feel our economy is heading for more troubles, rates should hold here or move lower. If you feel upcoming data will indicate our economic recovery is strong, rates will be pressured higher. I continue to favor locking mainly because can this really continue? At some point, rates have to reach a bottom and have some kind of correction. When the correction occurs, mortgage rates will rise much quicker than they have fallen over the last couple weeks. If you are currently floating, consider locking later today as MBS are moving higher which might lead to a reprice for the better later today.
We have a couple economic reports to digest this morning.
First out was the S&P/Case Shiller Home Price Index. This data tracks the monthly change in the value of residential real estate across the U.S. During periods of rising home values, home owners are more likely to spend money as they see the value of their largest asset moving higher. In contrast, during periods of declining home values, home owners are much more likely to save money to offset the losses in home equity. Many economists believe that until home prices fully stabilize it will be extremely difficult for our economy to sustain growth. This makes tracking home sales data much more important than usual.
This morning’s release gave us good news on housing indicating home prices rose in April more than expected month over month and year over year. The 20 city index posted a monthly gain of 0.4% beating expectations of a 0.1% drop. Year over year, home prices rose 3.8% beating expectations of only 3.4%. This is the biggest gain in home prices year over year since September 2006! The biggest gainer was San Francisco which posted a 18% gain from last year. On the other hand was Las Vegas which posted the largest year over year decline of 8.5%. This is the final Home Price Index with the home buyer tax credit in effect.
Our final scheduled economic release of the day gave us a measure on how consumers are feeling: Consumer Confidence. This is a survey conducted by the Conference Board, they ask consumers questions about their present economic attitude and expectations of future economic conditions. Since our economy is driven by consumer spending, market participants track consumer confidence to get a gauge on how the consumer is feeling. An optimistic consumer is much more likely to spend money which benefits the stock market while a pessimistic consumer is more likely to save or pay off debt which benefits the fixed income sector.
Last month’s report on consumer confidence came in at the highest level since early 2008 indicating the American consumer is more confident in our economic recovery. Today’s report was quite the turnaround. June consumer confidence plunges from 63.3 in May to 52.9 far short of expectations. On the news, stocks have moved lower and MBS are moving higher.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved once again. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. There are a couple lenders offering 4.25% but you will have to pay a little extra. 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 1 point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 3.75% to 4.00% range with similar costs but lower FICO score requirements.
It seems almost every day we are getting a new record low mortgage rate. The main reason for mortgage rates falling lately is concern that the global economy may be heading toward a double dip recession… basically our economic recovery here and abroad is being called into question. If you feel our economy is heading for more troubles, rates should hold here or move lower. If you feel upcoming data will indicate our economic recovery is strong, rates will be pressured higher. I continue to favor locking mainly because can this really continue? At some point, rates have to reach a bottom and have some kind of correction. When the correction occurs, mortgage rates will rise much quicker than they have fallen over the last couple weeks. If you are currently floating, consider locking later today as MBS are moving higher which might lead to a reprice for the better later today.
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