Mortgage Rates Continue Yesterday’s Rally
Posted 11-23-2010 at 09:48 AM by VictorBurek
Not much to recap from yesterday. Mortgage rates opened the day improved from last week thanks to ongoing concerns over the Ireland debt concerns. Mortgage backed securities moved higher throughout the day but no lender felt the price gains warranted a reprice for the better.
Overnight, treasuries rallied in a flight to safety trade. First, North Korea without provocation launched artillery shells on a South Korean island killing a couple soldiers and injuring several more. This led to Asia stocks selling off allowing money to flow into the safety of treasuries. Secondly, we had more Ireland debt concerns as one political group is calling on new elections which will delay any resolution to their debt problems. The lower treasury yields has helped MBS extend yesterday’s price gains which will allow lenders to pass along better rate sheets this morning… but we do have some data to be released, a treasury auction and the FOMC minutes from last meeting.
This morning we had two economic releases. First out was the first revision to 3rd quarter Gross Domestic Product. Market participants were expecting an upward revision to growth from 2.0% to 2.4%. The release indicated that our economy grew at 2.5%, slightly faster than expected . As I pointed out yesterday, unless this varies greatly from expectations it shouldn’t have a large impact on market sentiment as it is reporting on what has already happened… backwards looking. The uptick in growth is due to final sales being revised higher from +0.6% to +1.2%. Also, the report indicated that core inflation is still well in check and poses no immediate threat holding unchanged at +0.8%.
Released at 10am was Existing Home Sales for October which gives us an indication of the strength of the housing sector of our economy. This data is compiled by the National Association of Realtors(NAR). The report indicated existing home sales fell 2.2%, slightly more than expected, to a annualized pace of 4.43million. Year over year, existing home sales posted a 25.9% decline. In the release, NAR warns that many qualified buyers are being rejected due to overly stringent credit standards. The report also stated that the median home price fell for the fourth straight month to $170,500 while the available supply of homes on the market remains at an elevated 10.5 months. Tomorrow we get another look at housing with New Home Sales.
At 1pm, the Department of Treasury will announce the results of today’s auction of $35 billion of 5 year notes. Yesterday’s 2 year note auction was received very well and helped MBS hold onto earlier price gains. Strong demand for our nation’s debt is one of several factors that have attributed to mortgage rates holding near record lows.
Finally, the Federal Reserve will release the minutes from the last Federal Open Market Committee meeting where our nation’s monetary policy is set. Market participants will scour the minutes for any hint of future monetary policy and the Fed’s outlook on the economy. The release can have an impact on afternoon trading, so if you are currently floating your rate make sure you stay in contact with your mortgage professional.
Lender rate sheets are better this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. We have another couple lenders going as low as 4.125% today. As always, 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. Consumers with lower FICO scores or higher loan to values should consider an FHA loan which offers similar rates but with higher costs due to an upfront fee charged by FHA.
I favor floating all loans today.
Overnight, treasuries rallied in a flight to safety trade. First, North Korea without provocation launched artillery shells on a South Korean island killing a couple soldiers and injuring several more. This led to Asia stocks selling off allowing money to flow into the safety of treasuries. Secondly, we had more Ireland debt concerns as one political group is calling on new elections which will delay any resolution to their debt problems. The lower treasury yields has helped MBS extend yesterday’s price gains which will allow lenders to pass along better rate sheets this morning… but we do have some data to be released, a treasury auction and the FOMC minutes from last meeting.
This morning we had two economic releases. First out was the first revision to 3rd quarter Gross Domestic Product. Market participants were expecting an upward revision to growth from 2.0% to 2.4%. The release indicated that our economy grew at 2.5%, slightly faster than expected . As I pointed out yesterday, unless this varies greatly from expectations it shouldn’t have a large impact on market sentiment as it is reporting on what has already happened… backwards looking. The uptick in growth is due to final sales being revised higher from +0.6% to +1.2%. Also, the report indicated that core inflation is still well in check and poses no immediate threat holding unchanged at +0.8%.
Released at 10am was Existing Home Sales for October which gives us an indication of the strength of the housing sector of our economy. This data is compiled by the National Association of Realtors(NAR). The report indicated existing home sales fell 2.2%, slightly more than expected, to a annualized pace of 4.43million. Year over year, existing home sales posted a 25.9% decline. In the release, NAR warns that many qualified buyers are being rejected due to overly stringent credit standards. The report also stated that the median home price fell for the fourth straight month to $170,500 while the available supply of homes on the market remains at an elevated 10.5 months. Tomorrow we get another look at housing with New Home Sales.
At 1pm, the Department of Treasury will announce the results of today’s auction of $35 billion of 5 year notes. Yesterday’s 2 year note auction was received very well and helped MBS hold onto earlier price gains. Strong demand for our nation’s debt is one of several factors that have attributed to mortgage rates holding near record lows.
Finally, the Federal Reserve will release the minutes from the last Federal Open Market Committee meeting where our nation’s monetary policy is set. Market participants will scour the minutes for any hint of future monetary policy and the Fed’s outlook on the economy. The release can have an impact on afternoon trading, so if you are currently floating your rate make sure you stay in contact with your mortgage professional.
Lender rate sheets are better this morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. We have another couple lenders going as low as 4.125% today. As always, 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. Consumers with lower FICO scores or higher loan to values should consider an FHA loan which offers similar rates but with higher costs due to an upfront fee charged by FHA.
I favor floating all loans today.
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