Mortgage Rates Hold Steady on Data Free Day
Posted 01-11-2011 at 09:32 AM by VictorBurek
We had a pretty quiet day in the rates markets yesterday. Mortgage backed securities traded in a fairly tight range all day but went out at the price highs. Most of the price gains came late afternoon, so no lender repriced better leaving rate sheets unchanged on the day.
There are no scheduled economic data releases on the day.
At 1pm, the Department of Treasury will release the results of the first of three treasury auctions to be held this week. Today, they are offering $32billion of 3 year notes to the highest bidder. Already this morning, we are seeing treasury prices fall and yields rise as the market makes room for the additional supply of debt. The falling treasury prices are causing MBS to give up some of yesterday’s price gains. If today’s auction is received well, meaning strong demand for investors, we could see the price losses regained in afternoon trading. However, if the auction is met with weak demand, we could see MBS prices fall further which would increase consumer borrowing costs and mortgage rates.
Lender rate sheets are similar to those from yesterday. The par 30 year conventional rate mortgage remains in the 4.625% to 4.875% 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. For loan to values over 80%, you should consider an FHA loan which offers a par rate in the 4.50% to 4.75% range but with higher costs due to an upfront mortgage insurance fee of 1% of the loan amount.
If floating, stay in close contact with your mortgage professional. If the auction goes poorly, rates will move higher to make room for more treasury debt tomorrow and Thursday. If the auction goes well, I feel the price losses of this morning will be recaptured which could lead to a reprice for the better later this afternoon.
There are no scheduled economic data releases on the day.
At 1pm, the Department of Treasury will release the results of the first of three treasury auctions to be held this week. Today, they are offering $32billion of 3 year notes to the highest bidder. Already this morning, we are seeing treasury prices fall and yields rise as the market makes room for the additional supply of debt. The falling treasury prices are causing MBS to give up some of yesterday’s price gains. If today’s auction is received well, meaning strong demand for investors, we could see the price losses regained in afternoon trading. However, if the auction is met with weak demand, we could see MBS prices fall further which would increase consumer borrowing costs and mortgage rates.
Lender rate sheets are similar to those from yesterday. The par 30 year conventional rate mortgage remains in the 4.625% to 4.875% 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. For loan to values over 80%, you should consider an FHA loan which offers a par rate in the 4.50% to 4.75% range but with higher costs due to an upfront mortgage insurance fee of 1% of the loan amount.
If floating, stay in close contact with your mortgage professional. If the auction goes poorly, rates will move higher to make room for more treasury debt tomorrow and Thursday. If the auction goes well, I feel the price losses of this morning will be recaptured which could lead to a reprice for the better later this afternoon.
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