Another Bad Day for Mortgage Rates

Consumer borrowing costs started out yesterday higher than the prior day and the sentiment never shifted. First, the economic data, jobless claims and trade balance, were both much better than expectations. This pressured borrowing costs even higher. Then the 30 year bond auction results were released and they were not the best, resulting in even higher borrowing costs. All lenders did reprice for the worse as mortgage backed security prices moved steadily lower throughout the entire day.

We have no relevant data hitting today so look for the stock market to continue to give near term direction to mortgage rates. If stocks move higher, I suspect mortgage rates and treasury yields will continue to be pressured higher.

Lender rates sheets are worse again. The par 30 year conventional rate mortgage is now in the 4.375% to 4.625% range for well qualified consumers. If you are seeking a 15 year term, those rates are also slightly higher and are now in the 3.875% to 4.125% range. To secure a par interest rate you must be willing to pay all the closing costs associated with your loan including an estimated one point loan origination/discount/broker fee. If you are planning on keeping your home for less than 3 years, you should consider a loan with lesser or no costs to you but you will have to accept a higher interest rate.

If you have time to wait, be patient and let’s see if this recent shift in investor sentiment changes. We do have a busy week of data next week including some high impacting reports such as Retail Sales, Industrial Production, and Consumer Price Index to name a few. If this data is economic friendly, rates will continue to rise. However, if the data disappoints the markets we could see a shift in sentiment which could lead to rates falling back to the levels we saw just last week. Short term closings should have already locked, and if you haven’t I would still suggest locking today despite the higher rates.

The recent rise in rates illustrates the need to view short term closings and longer term closings differently. MBS prices tend to move in a sideways S pattern. The peak to the valley is referred to as the range. As stated before, lock the price highs, float the lows of the range. Short term closings may not have the time to wait for the next peak to come, while longer term closings have time on their side.

Have a great weekend but take a moment to remember September 11, 2001. Not only remember those who lost their lives on that fateful day, but say a prayer for those men and women who continue to put their life on the line to defend our values and way of life.