Mortgage Rates Improve to Start off the Year
Posted 01-04-2011 at 10:21 AM by VictorBurek
Mortgage rates got some relief yesterday after the beating they took in December when rates rose, and rose and rose some more for no apparent reason. Mortgage backed securities followed the lead of their benchmark big brother, the 10 year treasury note to higher prices and lower yields. All lenders repriced for the better as MBS closed the day at their price highs. To remind readers, as MBS move higher in price, lenders can offer lower mortgage rates.
Our lone economic report today was Factory Orders. This data represents the value of new orders placed for both durable and non-durable goods. Durable goods are products that have a life expectancy of at least three years such as autos, computers, machinery. Non-durable goods are products that can only be used one time or a product with less than a three year life expectancy. New orders is a forward looking indicating of industrial output. If orders are increasing, it indicates manufactures will be busier in the months ahead as they ramp up production to meet the demand. Busier factories can lead to additional hiring which is good for the overall economy and the equities market. To remind readers, as a general rule positive economic data benefits the stock market while negative economic data benefits the bond market and low mortgage rates.
The report indicated factory orders were much better than anticipated. New orders for manufactured goods rose 0.7% in November vs expectations of no change. There was also a revision higher of October’s orders from -0.9% to -0.7%. Despite the much better data, MBS continue to hold onto the gains they enjoyed yesterday. This is probably a result of overselling of bonds in December as the selloff was not justified by market data but more a result of very little volume of activity as many market participants were on vacation for the holidays.
At 2pm, the Federal Reserve will release the minutes from last month’s FOMC meeting. Market participants will thoroughly read the minutes for any insight into the thinking of Fed members and their outlook on monetary policy, inflation and economic outlook. Of significant importance will be the discussion of Quantitative Easing II and how much support there is for its continuance. Many believe that the Fed may not continue with its planned purchase of $600 billion of treasury securities.
Lender rate sheets are similar to those we received after the reprices yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. There are a few lenders offering 4.625%. 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 closing costs but you will have to accept a higher interest rate.
MBS are adding to the gains from yesterday. If you plan to lock today, hold off until later as reprices for the better should be coming into your loan officers mailbox soon.
Our lone economic report today was Factory Orders. This data represents the value of new orders placed for both durable and non-durable goods. Durable goods are products that have a life expectancy of at least three years such as autos, computers, machinery. Non-durable goods are products that can only be used one time or a product with less than a three year life expectancy. New orders is a forward looking indicating of industrial output. If orders are increasing, it indicates manufactures will be busier in the months ahead as they ramp up production to meet the demand. Busier factories can lead to additional hiring which is good for the overall economy and the equities market. To remind readers, as a general rule positive economic data benefits the stock market while negative economic data benefits the bond market and low mortgage rates.
The report indicated factory orders were much better than anticipated. New orders for manufactured goods rose 0.7% in November vs expectations of no change. There was also a revision higher of October’s orders from -0.9% to -0.7%. Despite the much better data, MBS continue to hold onto the gains they enjoyed yesterday. This is probably a result of overselling of bonds in December as the selloff was not justified by market data but more a result of very little volume of activity as many market participants were on vacation for the holidays.
At 2pm, the Federal Reserve will release the minutes from last month’s FOMC meeting. Market participants will thoroughly read the minutes for any insight into the thinking of Fed members and their outlook on monetary policy, inflation and economic outlook. Of significant importance will be the discussion of Quantitative Easing II and how much support there is for its continuance. Many believe that the Fed may not continue with its planned purchase of $600 billion of treasury securities.
Lender rate sheets are similar to those we received after the reprices yesterday. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. There are a few lenders offering 4.625%. 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 closing costs but you will have to accept a higher interest rate.
MBS are adding to the gains from yesterday. If you plan to lock today, hold off until later as reprices for the better should be coming into your loan officers mailbox soon.
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Reprices for the better coming in.Posted 01-04-2011 at 10:48 AM by VictorBurek
