Mortgage Rates Under Pressure but Still in the Range
Posted 09-29-2010 at 09:36 AM by VictorBurek
Mortgage rates held steady for most of yesterday; however, late in the day mortgage backed securities came under pressure to move lower. To remind readers, as MBS prices move higher, lenders can offer lower rates but as MBS prices move lower, lenders are forced to increase rates. A couple lenders issued a late day reprice for the worse but most left rates unchanged.
The only economic report today was the weekly Mortgage Bankers Associations Application Survey. This data shows the weekly change in the amount of loan applications for home purchases and refinances at major lenders. This is a lower tier report and has very minimal effect on the overall market sentiment.
Today’s report showed a weekly increase in purchase applications of 2.4%. This was the first increase in purchase applications in three weeks. Refinance applications dipped 1.6% for the fourth consecutive week of declining demand. In total, refinances made up 81% of all applications which indicates continued weakness in purchase activity in the months ahead.
Later today, the Department of Treasury will conduct its final auction of the week. Today, they will offer $29billion of 7 year notes to the highest bidder. The two prior auctions this week were met with very strong demand despite treasury yields near all time lows. Strong demand for our nation’s debt is one of several factors that have attributed to record low mortgage rates.
Lender rate sheets are very similar to yesterday. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers with many lenders offering 4.125%. I even saw one lender offering 4.00% but that rate will cost 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 an estimated one point loan origination/discount/broker fee. For consumers with lower FICO scores or higher loan to values, you should consider a FHA loan which offers similar rates but with higher costs.
MBS continue to hold in the bottom half of the range which we have used to recommend locking or floating. The strategy is quite simple, lock the price highs, float the price lows. With MBS in the bottom half of that range, there is room for continued improvement if you have time before your closing. Short term closings, within 10 days, should go ahead and lock as lenders are offering very aggressive rates and very near the best rates I have ever seen.
The only economic report today was the weekly Mortgage Bankers Associations Application Survey. This data shows the weekly change in the amount of loan applications for home purchases and refinances at major lenders. This is a lower tier report and has very minimal effect on the overall market sentiment.
Today’s report showed a weekly increase in purchase applications of 2.4%. This was the first increase in purchase applications in three weeks. Refinance applications dipped 1.6% for the fourth consecutive week of declining demand. In total, refinances made up 81% of all applications which indicates continued weakness in purchase activity in the months ahead.
Later today, the Department of Treasury will conduct its final auction of the week. Today, they will offer $29billion of 7 year notes to the highest bidder. The two prior auctions this week were met with very strong demand despite treasury yields near all time lows. Strong demand for our nation’s debt is one of several factors that have attributed to record low mortgage rates.
Lender rate sheets are very similar to yesterday. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers with many lenders offering 4.125%. I even saw one lender offering 4.00% but that rate will cost 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 an estimated one point loan origination/discount/broker fee. For consumers with lower FICO scores or higher loan to values, you should consider a FHA loan which offers similar rates but with higher costs.
MBS continue to hold in the bottom half of the range which we have used to recommend locking or floating. The strategy is quite simple, lock the price highs, float the price lows. With MBS in the bottom half of that range, there is room for continued improvement if you have time before your closing. Short term closings, within 10 days, should go ahead and lock as lenders are offering very aggressive rates and very near the best rates I have ever seen.
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