Mortgage Rates Hold Steady at New 2010 Lows
Posted 06-24-2010 at 08:26 AM by VictorBurek
Weak housing data over the past couple days have taken mortgage rates to the lowest levels seen this year and almost to the lowest level ever. On Tuesday we got worse than expected data on existing home sales, followed on Wednesday with much worse than expected new home sales data. To add more fuel to the fire, the Mortgage Bankers Associations application index also came in very disappointedly low indicating that demand for housing is falling and falling quick with no government support.
Mortgage backed securities opened the day yesterday relatively flat but following the data they started to rally. A very weak auction of 5 year notes temporarily stopped the rally but following the release of the FOMC statement which offered no surprises, MBS continued their move higher closing at the highest price ever. This allowed most lenders to reprice for the better late in the day.
We have a couple economic reports hitting the newswires this morning.
First up: Weekly Jobless Claims. This data is important because it provides a timely read on new developments in the labor market.
Released by the Department of Labor, this report provides three measures of the health of the job market:
1. Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week
2. Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job in the previous week
3. Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits, in the previous week
Since our economy is driven by consumer spending, market participants track employment data to get a sense of future economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the economy...but generally helpful in keeping consumer borrowing costs down.
Here are the results:
1. Initial Jobless Claims: -19,000 to 457,000 vs expectations of 460,000. Prior week’s report was revised worse adding +4000 claims to 476,000. Better than expected
2. Continued Claims: -45,000 to 4.55million vs expectations of 4.60million. Better than Expected
3. Extended and Emergency Benefits: +45,000 to 5.3million
Today’s data is positive news, but claims continue to hold at stubbornly high levels.
Released at the same time was the Durable Goods Order report. This data measures the number of new orders placed at U.S. factories for products that are expected to last at least three years. This would include items such as computers, appliances, and electronics. This report tells economists how busy factories will be in the months ahead. Increasing orders implies there is more potential for higher corporate revenues and profits. It could also imply that firms would need to hire additional staff to ensure they keep up with growing orders. This is a positive for the overall economy and stocks...but a negative for the fixed income sector/interest rates.
The report indicated Durable Goods Orders for May fell 1.1%, much worse than the 0.5% decline that was expected. When excluding transportation orders, the report indicated a higher than expected increase in orders of 0.9%. This is the third time in four months that ex transportation orders have increased which indicates that manufacturing continues to improve.
At 1pm, the Department of Treasury will announce the results of today’s auction of $30billion of 7 year notes. Tuesday’s 2 year note auction went very well but yesterday’s 5 year auction was met with subdued demand. If today’s 7 year auction does not go well, treasury yields and mortgage rates will be pressured higher later today.
Reports from fellow mortgage professionals indicate lender rate sheets to be holding at the best level of 2010. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% 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. If you plan to stay in your home for less than 3 years, you should consider a no cost refinance which offers a rate of around 5.00% today. You pay no upfront fees and no fees are rolled into the mortgage. The loan originator pays your closing costs for you by giving you a higher interest rate which pays the loan originator on the back side.
With rates very close to the best levels ever, how can you not lock? I favor locking all loans closing within the next 30 days.
Mortgage backed securities opened the day yesterday relatively flat but following the data they started to rally. A very weak auction of 5 year notes temporarily stopped the rally but following the release of the FOMC statement which offered no surprises, MBS continued their move higher closing at the highest price ever. This allowed most lenders to reprice for the better late in the day.
We have a couple economic reports hitting the newswires this morning.
First up: Weekly Jobless Claims. This data is important because it provides a timely read on new developments in the labor market.
Released by the Department of Labor, this report provides three measures of the health of the job market:
1. Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week
2. Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job in the previous week
3. Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits, in the previous week
Since our economy is driven by consumer spending, market participants track employment data to get a sense of future economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the economy...but generally helpful in keeping consumer borrowing costs down.
Here are the results:
1. Initial Jobless Claims: -19,000 to 457,000 vs expectations of 460,000. Prior week’s report was revised worse adding +4000 claims to 476,000. Better than expected
2. Continued Claims: -45,000 to 4.55million vs expectations of 4.60million. Better than Expected
3. Extended and Emergency Benefits: +45,000 to 5.3million
Today’s data is positive news, but claims continue to hold at stubbornly high levels.
Released at the same time was the Durable Goods Order report. This data measures the number of new orders placed at U.S. factories for products that are expected to last at least three years. This would include items such as computers, appliances, and electronics. This report tells economists how busy factories will be in the months ahead. Increasing orders implies there is more potential for higher corporate revenues and profits. It could also imply that firms would need to hire additional staff to ensure they keep up with growing orders. This is a positive for the overall economy and stocks...but a negative for the fixed income sector/interest rates.
The report indicated Durable Goods Orders for May fell 1.1%, much worse than the 0.5% decline that was expected. When excluding transportation orders, the report indicated a higher than expected increase in orders of 0.9%. This is the third time in four months that ex transportation orders have increased which indicates that manufacturing continues to improve.
At 1pm, the Department of Treasury will announce the results of today’s auction of $30billion of 7 year notes. Tuesday’s 2 year note auction went very well but yesterday’s 5 year auction was met with subdued demand. If today’s 7 year auction does not go well, treasury yields and mortgage rates will be pressured higher later today.
Reports from fellow mortgage professionals indicate lender rate sheets to be holding at the best level of 2010. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% 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. If you plan to stay in your home for less than 3 years, you should consider a no cost refinance which offers a rate of around 5.00% today. You pay no upfront fees and no fees are rolled into the mortgage. The loan originator pays your closing costs for you by giving you a higher interest rate which pays the loan originator on the back side.
With rates very close to the best levels ever, how can you not lock? I favor locking all loans closing within the next 30 days.
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