Consumer Borrowing Costs Improve Further
Posted 10-05-2010 at 08:10 AM by VictorBurek
Mortgage rates extended their gains yesterday following weaker than expected data on Factory Orders. Our stock market posted losses which allowed money to flow into the bond market. Some lenders came out of the gate with very aggressive rates while others were more conservative waiting to see how the market would react to the day’s data. The less aggressive lenders did issue a reprice for the better but the majority of lenders held rates unchanged on the day.
Our lone report today was the ISM Non-Manufacturing Index. This report gives us a look into the strength of the non manufacturing sector of our economy. Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction or worsening conditions. This report is a lower tier report and historically has had minimal effect on the overall market sentiment. Like its sister report on the manufacturing sector, this index has shown conditions worsening since peaking in Spring. Last month’s report fell 3 points to 51.5. Today’s index indicated the non-manufacturing sector of our economy improved to a print of 53.2, better than the 52.0 that was expected.
Typically on days with minimal data, the bond market will take direction from stocks. If stocks rally, bonds and mortgage rates will come under some pressure but if stocks sell off look for money to flow into the bond market which is supportive of low rates.
Lenders have improved rate sheets further this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range but many lenders are offering lower rates. To qualify for a par interest rate you must have a perfect credit profile and at least 20% equity in your home. If your credit profile is less than perfect, you will be subjected to Loan Level Price Adjusters(LLPA’s) which will either increase your closing costs or increase your interest rate. An example, a person with a 680 FICO score and a loan to value at 80% would have to pay an additional cost of 1.50% of the loan amount ($200,000 loan that equates to an additional $3000 in closing costs) to get the same rate quote as a person with a 740 FICO score and a loan to value of 80%. A 719 FICO would have to pay an additional .75% of the loan amount in costs. It is more important than ever to make sure your credit profile is as good as possible. LLPA’s are not used on 15 year terms, so a 680 FICO will get the same rate quote and costs as a 740 FICO.
Mortgage backed securities are holding at the top of the range which we have used to give lock/float recommendations. Lock the price highs, float the price lows. Today’s rate sheets are the about the best that I have ever seen. Yes, rates could continue to improve but we suspect they will come under pressure ahead of Friday’s Employment Situation Report. If you are within 30 days of closing, you should strongly consider locking today. Shorter term closings without a doubt should be locking.
Our lone report today was the ISM Non-Manufacturing Index. This report gives us a look into the strength of the non manufacturing sector of our economy. Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction or worsening conditions. This report is a lower tier report and historically has had minimal effect on the overall market sentiment. Like its sister report on the manufacturing sector, this index has shown conditions worsening since peaking in Spring. Last month’s report fell 3 points to 51.5. Today’s index indicated the non-manufacturing sector of our economy improved to a print of 53.2, better than the 52.0 that was expected.
Typically on days with minimal data, the bond market will take direction from stocks. If stocks rally, bonds and mortgage rates will come under some pressure but if stocks sell off look for money to flow into the bond market which is supportive of low rates.
Lenders have improved rate sheets further this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range but many lenders are offering lower rates. To qualify for a par interest rate you must have a perfect credit profile and at least 20% equity in your home. If your credit profile is less than perfect, you will be subjected to Loan Level Price Adjusters(LLPA’s) which will either increase your closing costs or increase your interest rate. An example, a person with a 680 FICO score and a loan to value at 80% would have to pay an additional cost of 1.50% of the loan amount ($200,000 loan that equates to an additional $3000 in closing costs) to get the same rate quote as a person with a 740 FICO score and a loan to value of 80%. A 719 FICO would have to pay an additional .75% of the loan amount in costs. It is more important than ever to make sure your credit profile is as good as possible. LLPA’s are not used on 15 year terms, so a 680 FICO will get the same rate quote and costs as a 740 FICO.
Mortgage backed securities are holding at the top of the range which we have used to give lock/float recommendations. Lock the price highs, float the price lows. Today’s rate sheets are the about the best that I have ever seen. Yes, rates could continue to improve but we suspect they will come under pressure ahead of Friday’s Employment Situation Report. If you are within 30 days of closing, you should strongly consider locking today. Shorter term closings without a doubt should be locking.
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