Mortgage Rates on the Rise
Posted 08-24-2009 at 08:05 AM by VictorBurek
Hopefully you followed my advice last week on locking your loan as the week ended on a sour note. Friday, mortgage backed securities gave back all of the gains they enjoyed during the week which brought mortgage rates back under 5%. Very positive news on housing and Ben Bernanke stating that “prospects for recovery look good” caused the mass exodus from fixed income sector to spur on a stock market rally. All lenders did reprice for the worse which by day’s end increased the par 30 year fixed rate mortgage to 5.125%.
Over the last few months, mortgage rates have stayed within a range of 4.875% on the low side to 5.5% on the top side. There appears to be no motivation to drive mortgage rates any lower and going forward I will continue to alert you to lock anytime rates fall below 5%, assuming they get there again.
A new week is here, so what is in store for mortgage rates? Today we get no economic reports to digest, so MBS will probably take their direction from the stock market and treasuries. Overnight global stock markets posted very healthy gains continuing the rally from the positive housing data here on Friday. If stocks here manage to rally again, that will apply pressure on mortgage rates to continue to rise. In addition, we have three treasury auctions this week with $42billion of 2 year notes being offered Tuesday, $39billion of 5 year notes on Wednesday and $28billion of 7 year notes on Thursday. The added supply of debt on the market will pressure treasury yields to rise to attract investors which we are already seeing this morning. Strong demand for our nation’s debt at these auctions can help mortgage rates to move lower.
The economic data starts to roll in on Tuesday. First, we get a read on consumer confidence. Since consumer spending accounts for 2/3rds of our economy, market participants are always eager to know how you are feeling. An optimistic consumer is more likely to spend which is good for economic growth and stocks, while a pessimistic consumer is more likely to save which is better for the fixed income sector. Last month’s consumer confidence came in disappointingly low following a few months in a row of improvements. We also get a couple readings on housing prices from S&P Case Shiller and the Federal Housing Finance Agency(FHFA). Any signs of improvement on home values will continue to pressure MBS lower which increases mortgage rates.
Wednesday we get a couple more readings on the housing sector with the release of the weekly Mortgage Bankers’ Association weekly applications index and New Home sales. Last week ended with very positive data on existing home sales which caused mortgage rates to move higher, so this report can add further confirmation to that trend if it comes in better than expected. We also get the monthly Durable Goods Orders report which gives investors a gauge into how busy manufacturers are going to be in the months ahead. Increasing orders by manufacturers is a clear indication that they expect to be busy in the months ahead. Last month’s report dropped sharply giving investors pause as to whether the economy was truly turning a corner heading toward positive growth. This is a forward looking report, so it can have a major impact on the markets.
On Thursday we get the weekly jobless claims and a reading on Gross Domestic Product(GDP). Continuing claims for the past two weeks have moved higher and if this trend continues, market participants will start to question whether the economy is on the rebound. The reading on GDP will be the first revised readings for the second quarter. The initial reading showed that our economy contracted -1.0% last quarter. Since this report is looking backwards(reporting on growth last quarter), unless it is far from consensus(-1.5%) it shouldn’t have a major impact on the markets.
The week ends with the highest impacting reports. The U.S. Department of Commerce will release the Personal Income and Outlays report which gives us a couple significant readings. First will be the income and outlays portion which shows market participants whether people’s income and spending is increasing or decreasing. Increasing income should lead to higher spending, so mortgage rates generally benefit with a lower or decreasing trend. Also included within this report is the Fed’s favorite gauge on inflation with the Personal Consumption Expenditure. All recent reports on inflation are indicating that rising prices are not a concern and this report is expected to confirm that once again. The final report of the week is another measure on how the consumer is feeling with the Consumer Sentiment report.
This week we get two different reports on consumer attitudes, I would like to find out how you the reader is feeling. Please share your comments on how you feel about the current economic conditions facing our nation and you specifically. More importantly, what is your outlook on the future. Consumer spending is driven by future expectations of job security and growing incomes. Do you feel secure with your job? Are you confident enough in your own personal situation to make a major purchase or are you continuing to hunker down and improve your balance sheet?
Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage is in the 5.125% to 5.375% range for the best qualified consumers. In order to secure a par interest rate 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 one point loan origination/discount/broker fee.
Over the last few months, mortgage rates have stayed within a range of 4.875% on the low side to 5.5% on the top side. There appears to be no motivation to drive mortgage rates any lower and going forward I will continue to alert you to lock anytime rates fall below 5%, assuming they get there again.
A new week is here, so what is in store for mortgage rates? Today we get no economic reports to digest, so MBS will probably take their direction from the stock market and treasuries. Overnight global stock markets posted very healthy gains continuing the rally from the positive housing data here on Friday. If stocks here manage to rally again, that will apply pressure on mortgage rates to continue to rise. In addition, we have three treasury auctions this week with $42billion of 2 year notes being offered Tuesday, $39billion of 5 year notes on Wednesday and $28billion of 7 year notes on Thursday. The added supply of debt on the market will pressure treasury yields to rise to attract investors which we are already seeing this morning. Strong demand for our nation’s debt at these auctions can help mortgage rates to move lower.
The economic data starts to roll in on Tuesday. First, we get a read on consumer confidence. Since consumer spending accounts for 2/3rds of our economy, market participants are always eager to know how you are feeling. An optimistic consumer is more likely to spend which is good for economic growth and stocks, while a pessimistic consumer is more likely to save which is better for the fixed income sector. Last month’s consumer confidence came in disappointingly low following a few months in a row of improvements. We also get a couple readings on housing prices from S&P Case Shiller and the Federal Housing Finance Agency(FHFA). Any signs of improvement on home values will continue to pressure MBS lower which increases mortgage rates.
Wednesday we get a couple more readings on the housing sector with the release of the weekly Mortgage Bankers’ Association weekly applications index and New Home sales. Last week ended with very positive data on existing home sales which caused mortgage rates to move higher, so this report can add further confirmation to that trend if it comes in better than expected. We also get the monthly Durable Goods Orders report which gives investors a gauge into how busy manufacturers are going to be in the months ahead. Increasing orders by manufacturers is a clear indication that they expect to be busy in the months ahead. Last month’s report dropped sharply giving investors pause as to whether the economy was truly turning a corner heading toward positive growth. This is a forward looking report, so it can have a major impact on the markets.
On Thursday we get the weekly jobless claims and a reading on Gross Domestic Product(GDP). Continuing claims for the past two weeks have moved higher and if this trend continues, market participants will start to question whether the economy is on the rebound. The reading on GDP will be the first revised readings for the second quarter. The initial reading showed that our economy contracted -1.0% last quarter. Since this report is looking backwards(reporting on growth last quarter), unless it is far from consensus(-1.5%) it shouldn’t have a major impact on the markets.
The week ends with the highest impacting reports. The U.S. Department of Commerce will release the Personal Income and Outlays report which gives us a couple significant readings. First will be the income and outlays portion which shows market participants whether people’s income and spending is increasing or decreasing. Increasing income should lead to higher spending, so mortgage rates generally benefit with a lower or decreasing trend. Also included within this report is the Fed’s favorite gauge on inflation with the Personal Consumption Expenditure. All recent reports on inflation are indicating that rising prices are not a concern and this report is expected to confirm that once again. The final report of the week is another measure on how the consumer is feeling with the Consumer Sentiment report.
This week we get two different reports on consumer attitudes, I would like to find out how you the reader is feeling. Please share your comments on how you feel about the current economic conditions facing our nation and you specifically. More importantly, what is your outlook on the future. Consumer spending is driven by future expectations of job security and growing incomes. Do you feel secure with your job? Are you confident enough in your own personal situation to make a major purchase or are you continuing to hunker down and improve your balance sheet?
Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage is in the 5.125% to 5.375% range for the best qualified consumers. In order to secure a par interest rate 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 one point loan origination/discount/broker fee.
Total Comments 0
