The Bleeding Stops for Mortgage Rates
Posted 02-08-2011 at 11:22 AM by VictorBurek
Not much to recap from yesterday. We had no economic data to hit the news wires. Mortgage rates opened similar to closing prices from Friday. After a sideways morning, mortgage backed securities began to rally right at noon and continued through close. The price gains were not substantial, but there were enough to allow lenders to reprice for the better improving consumer borrowing costs.
Like yesterday, the economic calendar is empty but we did have the first of three treasury auctions.
At 1pm, the Department of Treasury released the results of today’s auction of $32 billion of 3 year notes. The last auction of similar securities generated a bid to cover ratio of 3.06. The BTC ratio gives the market a gauge for the demand for our nation’s debt. The higher the BTC, the greater the demand. Higher demand increases prices and lowers yields.
Today’s auction saw average demand with a BTC of 3.01. Following the results, MBS have moved back to the lows of yesterday.
Lender rate sheets are similar to the repriced ones from yesterday afternoon. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% 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. You may elect to pay less in closing costs, but you will have to accept a higher interest rate.
I continue to favor floating all loans. The recent and rapid rise in treasury yields should draw strong enough demand to at least hold rates at current levels. Strong demand for our nation’s debt is one of several factors that have attributed to mortgage rates holding near record low levels for quite some time.
Like yesterday, the economic calendar is empty but we did have the first of three treasury auctions.
At 1pm, the Department of Treasury released the results of today’s auction of $32 billion of 3 year notes. The last auction of similar securities generated a bid to cover ratio of 3.06. The BTC ratio gives the market a gauge for the demand for our nation’s debt. The higher the BTC, the greater the demand. Higher demand increases prices and lowers yields.
Today’s auction saw average demand with a BTC of 3.01. Following the results, MBS have moved back to the lows of yesterday.
Lender rate sheets are similar to the repriced ones from yesterday afternoon. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% 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. You may elect to pay less in closing costs, but you will have to accept a higher interest rate.
I continue to favor floating all loans. The recent and rapid rise in treasury yields should draw strong enough demand to at least hold rates at current levels. Strong demand for our nation’s debt is one of several factors that have attributed to mortgage rates holding near record low levels for quite some time.
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