The Bleeding Stops, Mortgage Rates Improve
Posted 09-14-2010 at 08:23 AM by VictorBurek
The interest rates markets corrected some yesterday following the beating they took last week when mortgage rates rose about an .125% to a .25%. Mortgage backed securities managed to regain about half the losses they suffered which allowed lenders to reprice for the better. Some lenders even repriced for the better twice as MBS steadily moved higher throughout the day. By day’s end, many lenders had lowered the par rate from 4.375% to 4.25%.
Our lone economic report today was Retail Sales. This data reports on the monthly change in total sales receipts taken in at retail stores. The Census Bureau's Retail Sales release is the first report of the month on consumer spending, and since consumer spending accounts for a large majority of GDP, it's capable of affecting the sentiment of the marketplace. The data released today covered consumer spending in August.
In a surprise, today’s report was much better than expected. Overall Retail Sales rose last month 0.4% beating expectations of only a 0.3% rise. When excluding auto sales, the report was double expectations coming in at a month over month increase of 0.6%. The only negative news was downward revision to last month’s report of 0.1% for both overall and excluding auto sales. This is the second month in a row of month over month increases in Retail Sales.
Normally, when economic data is better than expected, you would expect to see stocks move higher and bonds move lower. Well, that didn’t happen this morning. Following the release, stock market futures have moved lower while bonds continue to move higher. As bond prices move higher, yields(interest rates) move lower. I feel this supports the theory that the move higher last week with interest rates was overdone and a correction was warranted.
Lender rates sheets are improved this morning. The par 30 year conventional rate mortgage has fallen back to the 4.25% to 4.50% 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 the closing costs including an estimated one point loan origination/discount/broker fee. There are a few lenders offering 4.125%, but it will costs a little extra. If you are seeking a 15 year term, the par rate continues to hold in the 3.75% to 4.00% range.
If you have been floating, you have had a bumpy ride over the last week. Our strategy for floating is to lock the price highs, float the price lows. Last week, I recommended to float despite mortgage rates edging higher following this strategy. We are not quite to the price highs but I feel we are close enough to warrant locking today. Remember, pigs get fat while hogs get slaughtered. We don’t want to get too greedy. Recent economic data has been positive including today’s report. We dodged a big bullet today.
Our lone economic report today was Retail Sales. This data reports on the monthly change in total sales receipts taken in at retail stores. The Census Bureau's Retail Sales release is the first report of the month on consumer spending, and since consumer spending accounts for a large majority of GDP, it's capable of affecting the sentiment of the marketplace. The data released today covered consumer spending in August.
In a surprise, today’s report was much better than expected. Overall Retail Sales rose last month 0.4% beating expectations of only a 0.3% rise. When excluding auto sales, the report was double expectations coming in at a month over month increase of 0.6%. The only negative news was downward revision to last month’s report of 0.1% for both overall and excluding auto sales. This is the second month in a row of month over month increases in Retail Sales.
Normally, when economic data is better than expected, you would expect to see stocks move higher and bonds move lower. Well, that didn’t happen this morning. Following the release, stock market futures have moved lower while bonds continue to move higher. As bond prices move higher, yields(interest rates) move lower. I feel this supports the theory that the move higher last week with interest rates was overdone and a correction was warranted.
Lender rates sheets are improved this morning. The par 30 year conventional rate mortgage has fallen back to the 4.25% to 4.50% 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 the closing costs including an estimated one point loan origination/discount/broker fee. There are a few lenders offering 4.125%, but it will costs a little extra. If you are seeking a 15 year term, the par rate continues to hold in the 3.75% to 4.00% range.
If you have been floating, you have had a bumpy ride over the last week. Our strategy for floating is to lock the price highs, float the price lows. Last week, I recommended to float despite mortgage rates edging higher following this strategy. We are not quite to the price highs but I feel we are close enough to warrant locking today. Remember, pigs get fat while hogs get slaughtered. We don’t want to get too greedy. Recent economic data has been positive including today’s report. We dodged a big bullet today.
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Comments
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MBS still holding onto the morning price gains despite stocks posting modest gains. Very unlikely to see reprices for the better unless MBS move higher. No need to lock right now, but look to lock at close of business.Posted 09-14-2010 at 11:17 AM by VictorBurek
