Consumer Borrowing Costs Improve as Range Holds
Posted 09-27-2010 at 09:14 AM by VictorBurek
Mortgage rates ended last week on a two day losing streak. The best rates of the week were seen on Wednesday following the release of the FOMC statement. On Friday, mortgage backed securities touched the bottom end of the range which we have used to make lock/float recommendations following the strategy of lock the price highs, float the lows. If you floated over the weekend, you were rewarded this morning with marginally improved rate sheets.
There is no economic data on the calendar today but we do have a treasury auction of 2 year notes. Unless the demand is far weaker than average, I do not look for it to have an impact on mortgage rates. Tomorrow’s 5 year and Wednesday’s 7 year note auction will be of higher importance.
As for the rest of the week, the data is quite slow until Thursday when we get three reports. Of highest importance will be the final reading of second quarter Gross Domestic Product. This will be followed with the weekly Jobless Claims which is expected to show a decline in claims from the prior week. We also get a read on the strength of business conditions in the Chicago region with the Chicago Purchasers Manager Index (PMI) which is expected to show a small decline in business conditions.
Friday carries the most important data of the week as we get a couple reports on the condition of the American consumer. First out will be Personal Income and Outlays which measures the monthly change in amount of money made and spent by consumers. It also contains the Fed’s favorite gauge on inflation… the Personal Consumption Expenditure. The report is expected to show gains in both income and spending and inflation remaining tame. This will be followed with Consumer Sentiment which is expected to show a uptick in consumer attitudes. We also get a reading on the strength of the national manufacturing sector with the release of the ISM Manufacturing Index. Last month’s ISM index came in stronger than expected and this month’s report is expected to show a slight drop. Bonds and mortgage rates would benefit with a weaker consumer and manufacturing conditions while the stock market would likely rally if better than expected.
The par 30 year conventional rate mortgage remains in 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 closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in costs but you will have to accept a higher interest rate. Either way, as a consumer you end up paying the costs. You either pay them upfront by rolling into the new mortgage or you pay them over time with a higher interest rate.
Same advice as Friday…Our strategy for locking, which has been very successful, is to lock at the MBS price highs and float the MBS price lows. Currently, mortgage backed security prices are closer to the bottom of the lock/float range than the top, this means we should wait it out for a technical turn around in prices. Unless you are closing in the next week, floating is acceptable.
There is no economic data on the calendar today but we do have a treasury auction of 2 year notes. Unless the demand is far weaker than average, I do not look for it to have an impact on mortgage rates. Tomorrow’s 5 year and Wednesday’s 7 year note auction will be of higher importance.
As for the rest of the week, the data is quite slow until Thursday when we get three reports. Of highest importance will be the final reading of second quarter Gross Domestic Product. This will be followed with the weekly Jobless Claims which is expected to show a decline in claims from the prior week. We also get a read on the strength of business conditions in the Chicago region with the Chicago Purchasers Manager Index (PMI) which is expected to show a small decline in business conditions.
Friday carries the most important data of the week as we get a couple reports on the condition of the American consumer. First out will be Personal Income and Outlays which measures the monthly change in amount of money made and spent by consumers. It also contains the Fed’s favorite gauge on inflation… the Personal Consumption Expenditure. The report is expected to show gains in both income and spending and inflation remaining tame. This will be followed with Consumer Sentiment which is expected to show a uptick in consumer attitudes. We also get a reading on the strength of the national manufacturing sector with the release of the ISM Manufacturing Index. Last month’s ISM index came in stronger than expected and this month’s report is expected to show a slight drop. Bonds and mortgage rates would benefit with a weaker consumer and manufacturing conditions while the stock market would likely rally if better than expected.
The par 30 year conventional rate mortgage remains in 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 closing costs including an estimated one point loan origination/discount/broker fee. You may elect to pay less in costs but you will have to accept a higher interest rate. Either way, as a consumer you end up paying the costs. You either pay them upfront by rolling into the new mortgage or you pay them over time with a higher interest rate.
Same advice as Friday…Our strategy for locking, which has been very successful, is to lock at the MBS price highs and float the MBS price lows. Currently, mortgage backed security prices are closer to the bottom of the lock/float range than the top, this means we should wait it out for a technical turn around in prices. Unless you are closing in the next week, floating is acceptable.
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MBS at highs of the day... some lenders may reprice better.Posted 09-27-2010 at 11:25 AM by VictorBurek
