Borrowing Costs Improve as Market Awaits Fed Decision
Posted 09-21-2010 at 08:19 AM by VictorBurek
Mortgage rates modestly improved yesterday as an oversold bond market received investor money. The day began with mortgage rates extending their losing streak to four days, but around the noon hour the bond market improved and continued through close. Most lenders did reprice for the better passing along some of the price gains.
Our lone economic release this morning was Housing Starts & Building Permits from the Department of Commerce. Housing starts data estimates how much new residential real estate construction occurred in the previous month. Building Permits data provides an estimate on the number of homes planning on being built, a forward looking indicator of economic expansion. Recent reports on housing have been very disappointing, especially since the homebuyer tax credit expired in April. Last month’s report did show a slight rise of 1.7% for the first increase since the end of the tax credit, but did fall short of economists’ expectations.
This morning’s release showed the second straight month of improving numbers. Housing starts rose 10.5% in August to an annualized pace of 598,000 vs expectations of only 550,000. July’s number was revised lower from the first reported pace of 546,000 to 541,000. Construction of new single family residences rose 4.3% to 438,000 while multi-family units, such as townhomes and apartment buildings rose 32% to 160,000. Building permits also came in better than expected rising 1.8% to an annualized pace of 569,000 vs expectations of 560,000. Building permits last month set an all time low of only 559,000.
At 2:15 eastern time, the Federal Open Market Committee will release their monetary policy statement following the conclusion of their meeting. At these meetings, the FOMC sets our nation’s monetary policy, and gives an outlook on our economy. The vast majority of experts expect no change to the current fed fund rate of 0 to .25%; however, market participants will thoroughly read the statement for any indication of future monetary policy. The biggest question with today’s statement will be if the FOMC announces any new quantitative easing measures. Mortgage rates would likely suffer from a bullish economic outlook from the Fed. However, if they scale back their economic outlook by stating the economy will grow at a much more slower pace, mortgage rates could benefit later today.
Even though today’s lone economic report was better than expected, MBS continue to improve this morning and lenders have passed along better pricing. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. There are a couple lenders offering 4.125%. If you are seeking a 15 year term, the par rate continues to hold in the 3.75% to 4.00% 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 floating, you better be on high alert when the FOMC releases their statement. If no new quantitative easing program is announced, I suspect mortgage rates will come under pressure later this afternoon. Stay in close contact with your mortgage professional.
Our lone economic release this morning was Housing Starts & Building Permits from the Department of Commerce. Housing starts data estimates how much new residential real estate construction occurred in the previous month. Building Permits data provides an estimate on the number of homes planning on being built, a forward looking indicator of economic expansion. Recent reports on housing have been very disappointing, especially since the homebuyer tax credit expired in April. Last month’s report did show a slight rise of 1.7% for the first increase since the end of the tax credit, but did fall short of economists’ expectations.
This morning’s release showed the second straight month of improving numbers. Housing starts rose 10.5% in August to an annualized pace of 598,000 vs expectations of only 550,000. July’s number was revised lower from the first reported pace of 546,000 to 541,000. Construction of new single family residences rose 4.3% to 438,000 while multi-family units, such as townhomes and apartment buildings rose 32% to 160,000. Building permits also came in better than expected rising 1.8% to an annualized pace of 569,000 vs expectations of 560,000. Building permits last month set an all time low of only 559,000.
At 2:15 eastern time, the Federal Open Market Committee will release their monetary policy statement following the conclusion of their meeting. At these meetings, the FOMC sets our nation’s monetary policy, and gives an outlook on our economy. The vast majority of experts expect no change to the current fed fund rate of 0 to .25%; however, market participants will thoroughly read the statement for any indication of future monetary policy. The biggest question with today’s statement will be if the FOMC announces any new quantitative easing measures. Mortgage rates would likely suffer from a bullish economic outlook from the Fed. However, if they scale back their economic outlook by stating the economy will grow at a much more slower pace, mortgage rates could benefit later today.
Even though today’s lone economic report was better than expected, MBS continue to improve this morning and lenders have passed along better pricing. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. There are a couple lenders offering 4.125%. If you are seeking a 15 year term, the par rate continues to hold in the 3.75% to 4.00% 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 floating, you better be on high alert when the FOMC releases their statement. If no new quantitative easing program is announced, I suspect mortgage rates will come under pressure later this afternoon. Stay in close contact with your mortgage professional.
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MBS are rallying following Fed statement. Lenders should be repricing for the better soon. If floating, continue to float.
Posted 09-21-2010 at 12:53 PM by VictorBurek