Mortgage Rates Move Off Record Lows as Rally Exhausts

Mortgage rates rallied to new all-time lows yesterday following a few disappointing housing headlines. While it has been no secret to housing industry professionals, the post-homebuyer tax credit hangover appears to have caught some folks on Wall Street off-guard. Stocks sold off, interest rates rallied and lender rate sheets were the most aggressive we've ever seen them. I locked all the loans in my pipeline.


We've had a great run over the past few days. MBS prices hit new all-time highs yesterday. Loan pricing was the most aggressive we've ever seen it. Lenders were practically begging for borrowers to lock their loans. Unfortunately the rally lost some steam today. Nothing seems to have caused it, but lenders repriced for the worse and mortgage rates increased this afternoon. I think the best way to describe the move higher is "rally exhaustion". Prices were just too high and profits were taken.

Reports from fellow mortgage professionals indicate lender rate sheets to be worse than yesterday after lenders repriced for the worse today. Higher mortgage borrowing costs will most noticeable via an increase in discount points. 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 4.875% 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.

Mortgage rates are ridiculously aggressive right now. I favor locking all loans.

Rate Lock Advisory - Friday Jun. 25th (Friday's bond market has opened flat after this morning's economic data brought no significant surprises)

Rate Lock Advisory - Friday Jun. 25th

Friday's bond market has opened flat after this morning's economic data brought no significant surprises. The stock markets are also relatively calm with the Dow down 4 points and the Nasdaq down 3 points. The bond market is nearly unchanged from yesterday's close, but we will still likely see an increase of approximately .125 of a discount point in this morning's mortgage rates due to weakness late yesterday.

Yesterday's 7-year Treasury Note auction actually went fairly well, especially when compared to Wednesday's 5-year sale. However, the bond market wasn't too impressed and we saw some lenders revise rates upward yesterday afternoon. Many may have chosen to reflect that revision in today's rates, but overall we should see a slight increase compared to yesterday's morning rates.

There were two economic reports posted this morning, but neither is considered highly important. The first was the final reading to the 1st Quarter Gross Domestic Product (GDP) that came in at 2.7% annual rate of growth. This was a downward revision from the previous estimate, which is good news for bonds and mortgage rates. It means that the economy did not grow as much as previously thought during the first three months of the year. Unfortunately, this data is too old to have much influence on the markets and mortgage rates or we would have likely seen an improvement in today's rates.

The second report of the day was the University of Michigan's revision to their Index of Consumer Sentiment. It revealed a reading of 76.0, up from the preliminary reading of 75.5. That means surveyed consumers were a little more optimistic about their own financial situations than they were earlier this month and they may be slightly more willing to make large purchases in the near future. Ideally, a downward revision would have been preferred, but it was not enough of a change to affect this morning's mortgage rates.

Next week is busy with relevant economic reports scheduled for release every day except Wednesday. Monday does bring us some fairly important data when May's Personal Income and Outlay figures will be posted. The week closes with the almighty Employment report Friday, but there is some fairly important reports being released in between. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory - Monday Jun. 14th

Monday's bond market has opened in negative territory following a relatively strong opening in stocks. The stock markets are kicking the week off with the Dow up 63 points and the Nasdaq up 24 points. The bond market is currently down 20/32, but we will likely still see a slight improvement in this morning's mortgage rates due to strength late Friday.

There is no relevant economic data being posted today or tomorrow, so look for any further changes in mortgage rates to come as a result of changes in the stock markets. If the stock markets remain near current levels, mortgage rates should follow suit. If the major stock indexes extend their current gains, mortgage rates could move higher this afternoon and tomorrow.

The rest of the week is fairly busy with five economic reports scheduled for release, but they are all being posted over two days. Two of the five are considered to be of high importance to the markets and mortgage rates. The remaining three are of interest to the markets but likely will not cause a large change in mortgage rates unless they vary greatly from forecasts.

Wednesday brings us the release of three reports that are relevant to mortgage rates. The day's reports are a broad spectrum of data ranging from housing figures to manufacturing output to an important inflation reading. Their importance to the markets also is a wide variety. The first report of the day is May's Housing Starts that tracks starts of new home projects. The second is May's Producer Price Index (PPI) that gives us a very important measurement of inflationary pressures at the producer level of the economy. And the third is May's Industrial Production that helps us track manufacturing sector strength.

Overall, look for Wednesday to be the biggest day of the week. Not just because it brings the release of three of the five reports, but also because it brings us the PPI that is considered to be a key inflation reading. Thursday is also very important with the CPI being posted, so look for the most movement in rates during the middle part of the week.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory - Wednesday May. 19th

Wednesday's bond market initially opened in negative territory but has since erased those gains as stock prices started to fall. The stock markets are in selling mode again with the Dow down 122 points and the Nasdaq down 27 points. The bond market is currently up 2/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

Today's important inflation data gave us favorable results. The Labor Department reported that the Consumer Price Index (CPI) fell 0.1% last month when it was expected to rise slightly. Even better news was the core data reading that showed no change from March when it was expected to rise slightly. This means that inflationary pressures at the consumer level of the economy were lighter than thought. That is good news for rates because it makes long-term securities such as mortgage-related bonds more attractive to investors.

Later today, the minutes from the last FOMC meeting will be released. Market participants will be looking at how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

Tomorrow brings us the last relevant economic data of the week when April's Leading Economic Indicators (LEI) are posted at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a 0.2% increase from March's reading, meaning that economic activity is likely rise slightly during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher tomorrow.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory - Monday May. 17th

Monday's bond market has opened up slightly following a calm open in stocks. The major stock indexes are mixed with the Dow down 14 points and the Nasdaq up 2 points. The bond market is currently up 3/32, which should keep this morning's mortgage rates at Friday's levels.

There is no relevant economic news scheduled for release today. As long as the stock markets remain near current levels, the bond market and mortgage rates will likely follow suit today. If they move much higher or lower than where they are this morning, bond prices will probably move in the opposite direction. If stocks rise, look for upward revisions to rates later today. If they fall form current levels, mortgage pricing may revise lower this afternoon.

The first report of the week is April's Producer Price Index (PPI) early tomorrow morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes more volatile food and energy prices is also expected to rise 0.1%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

April's Housing Starts will also be posted early tomorrow morning, but is much less important than the PPI readings are. This data measures housing sector strength and mortgage credit demand by tracking new permits and actual starts of new home construction. It is expected to show an increase in new starts from March's readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts and the PPI matches forecasts.

Overall, it appears it is going to be another active week for the mortgage market. We have two inflation readings that are very important to the bond market the middle part of the week. Stock market volatility will likely also affect bond trading again this week, so we may see movement in rates several days. Wednesday's CPI is the single most important report of the week, but tomorrow's PPI can also heavily influence the bond market.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If I were considering financing/refinancing a home, I would....

Rate Lock Advisory - Friday May. 14th

Friday's bond market has opened up sharply following another round of selling in stocks. The stock markets are showing sizable losses with the Dow down 180 points and the Nasdaq down 52 points. The bond market is currently up 17/32, which will likely improve this morning's mortgage rates by approximately .250 - .375 of a discount point.

Due to the stock selling, today's economic data did not influence bond trading and mortgage rates as it was expected to do. The data itself was unfavorable for bonds and rates, but the market seems to be more interested in the stock weakness that has shifted funds away from stocks and into bonds.

The first piece of today's three releases was April's Retail Sales. The Commerce Department said that sales at retail level establishments rose 0.4% last month. This was twice the increase of 0.2% that was expected, meaning consumers spent more than thought. However, if more volatile auto-related sales are excluded, they would have matched forecasts. This has helped prevent the bond market from reacting negatively to the data, but the stock selling has taken center stage anyhow.

The second report of the day was April's Industrial Production. It showed that production at U.S. factories, mines and utilities rose 0.8%. That matched forecasts, meaning that industrial production did not exceed expectations. The sizable gain is good news for the economy and bad news for bonds, but this data is much less important to the markets than the Retail Sales data is. Therefore, it also has had little impact on today's mortgage pricing.

The last report of the week was May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. It showed a reading of 73.3, indicating that consumers were more optimistic about their own financial situations this month than they were last month. Again, as with the earlier two reports, this data has not affected mortgage rates this morning.

Next week brings us the release of a several relevant reports, including two key inflation readings. Nothing of importance is scheduled for release Monday and the most important data will be released mid-week. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory - Tuesday May. 11th

Tuesday's bond market has opened relatively flat considering the past few trading sessions. The stock markets are showing early losses with the Dow down 32 points and the Nasdaq down 7 points. The bond market is currently up 2/32, but I don't believe this will be enough to cause much change to mortgage rates.

There is no relevant economic news scheduled for release today. This will leave the bond market and mortgage rates subject to stock market movements again. As long as the major stock indexes remain near current levels, I suspect that mortgage rates will follow suit. However, afternoon strength or selling in stocks could make bonds less or more appealing to investors and lead to afternoon changes in mortgage rates.

Tomorrow does bring us some economic data, but it is the week's least important news. March's Goods and Services Trade Balance report will be released early tomorrow morning, giving us the size of the U.S. trade deficit. It is expected to show a $40.5 billion trade deficit. This report likely will have little impact on tomorrow's mortgage rates unless it shows a significant variance between forecasts and its actual results.

10-year Treasury Notes will be sold tomorrow and could impact bond prices and mortgage rates. The 30-year Bond sale will take place Thursday. Results of the auctions will be posted at 1:30 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale could lead to higher mortgage pricing those afternoons.

The remaining three economic reports will be released Friday morning. This is when we will get April's Retail Sales data (highly important), April's Industrial Production (moderately important) and May's University of Michigan's Index of Consumer Sentiment (moderately important).

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Friday will Lead to a Great Week - Rate Lock Advisory - Friday May. 7th

Friday's bond market has opened in negative territory after this morning's employment data gave us mixed results. The stock markets are experiencing quite a bit of volatility this morning fluctuating between positive and negative ground. They initially opened with respectable gains after yesterday's 347-point drop in the Dow, but quickly gave them up before moving higher yet again. They are currently well in negative territory with the Dow down 91 points and the Nasdaq down 41 points.

The bond market initially appeared to be ready to give back a good part of yesterday's gains. It traded in negative ground overnight and even after this morning's data was posted it remained there. However, it seems to be slowly erasing these losses as the morning trading session continues. After being down 14/32 earlier, it is currently down only 5/32. We will still likely see an improvement of approximately .250 - .375 of a discount point in this morning's mortgage rates though due to strength late yesterday as stocks slid. If the stock markets continue to fall, bonds should improve enough to possibly revise mortgage rates lower this afternoon.

The Labor Department was in the spotlight again this morning when they posted April's employment statistics. They announced that the unemployment rate rose to 9.9% last month when it was expected to remain at 9.7%. This was the part of the report that was good for bonds and mortgage rates. The bad news came in the payroll numbers that showed that 290,000 jobs were added to the economy during the month that was the largest monthly addition since March 2006. Analysts had forecasted only 187,000 new jobs, indicating that the employment sector was hiring more than thought. Today's report also revealed an upward revision of 68,000 jobs to March's previously announced total, meaning that 573,000 new payrolls have been added to the economy so far this year.

Overall, the data supports both theories about the strength and recovery of the economy. On one hand, the unemployment rate nearly touched the 10.0% benchmark that the Fed itself has indicated is a possibility. That hints that there may be room for the figure to move even higher. But, the job growth is fairly impressive and puts us on a pace for strong job growth for the year if the current rate continues. During the first few minutes of trading it seemed that the markets couldn't quite decide if this data is worth adding or selling holdings. Now it seems that with the overseas financial crisis still looming, we could see more weakness in stocks today. Holding out for an improvement to rates later today may be a safe bet, but I still think that we are due for a correction in bonds that would bring mortgage rates off their current lows. So, please proceed cautiously if still willing to gamble on mortgage rates.

Next week is relatively active with a handful of relevant economic reports schedule and two important Treasury auctions set. There is no relevant data scheduled for release Monday or Tuesday, so I am expecting any weekend news on the financial situations overseas and the stock markets to drive bond trading and mortgage rates those days. Look for details on next week's relevant events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory - Thursday May. 6th

Thursday's bond market has opened in positive territory yet again after this morning's economic data gave us favorable results and the stock markets continued their downward move. The Dow is currently down 72 points while the Nasdaq has fallen 25 points. The bond market is currently up 6/32, which should improve this morning's mortgage rates slightly.

The Labor Department said this morning that the 1st quarter employee productivity rose at a 3.6% annual rate. This was higher than expected, meaning workers were more productive than thought. The employee costs portion of the data showed a larger than forecasted decline, indicating that wages were not rising rapidly. Both of these readings were good news for bonds and mortgage rates, but the biggest factor in this morning's trading was another round of stock losses.





The Labor Department also gave us last week's unemployment figures. They announced that 444,000 new claims for unemployment benefits were filed last week, slightly exceeding forecasts. However, this data does not carry the significance to affect mortgage rates with just a slight variance from expectations.

Tomorrow brings us the release of the almighty monthly Employment report, giving us April's employment statistics. This data has the importance to cause a huge rally or major sell-off in the bond market and large changes in mortgage rates.

The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected. Current forecasts are calling for the unemployment rate to remain at 9.7% and that approximately 187,000 jobs were added to the economy during the month. Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings.

The recent bond rally has been wonderful for mortgage shoppers, but I have concerns as to whether it can continue much longer. My issue is that the rally has been fueled much more by stock weakness than weak economic data. I believe there is still room for the stock markets to fall, but we have seen a significant improvement in bonds from their recent lows. The yield on the benchmark 10-year Treasury Note actually crossed over 4.00% just last month but currently stands at 3.48%. And we must keep in mind that rates usually spike higher much quicker than they fall. In other words, it will not take much bad news for the bond market to start reversing course and give back some of its recent gains.

Tomorrow's data certainly has the importance to do this and to do it quickly. It is my opinion that if tomorrow's data shows stronger than expected results that we will see the bond market go into selling mode, driving mortgage rates higher. I also believe that it will take much weaker than forecasted results for the bond market and mortgage rates to greatly improve. I also think it is going to take a lot for the bond market to react favorably to the data but just a little surprise to create a negative reaction. Accordingly, I strongly recommend proceeding with caution into tomorrow if still floating an interest rate.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Rates Inch Lower as Nervous Investors Seek Safety

Mortgage rates fell a few more basis points yesterday as global economic concerns continue to lead nervous investors to re-allocate their funds into risk free benchmark Treasury debt. This "flight to safety" helped mortgage-backed securities prices tick higher which has allowed lenders to offer progressively lower consumer borrowing costs over the last four days.

A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.

The flight to quality continues to move interest rates. Although lenders have been unable to move mortgage rates lower in step with benchmark Treasury yields, lender rate sheets did improve again today. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range with a few more lenders offering 4.75% to 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 have lower FICO scores or higher loan to values, you should consider a government loan which offers the same rates as conventional with higher costs.

We have seen several days in a row of improving lender pricing thanks to the sovereign debt concerns with Greece and other European countries. At some point this is going to come to a conclusion which will probably result in the unwinding of the “flight to safety” trade that has benefited mortgage rates recently. Once that happens, we will see increases in mortgage rates. I continue to favor locking all loans closing within 30 days as I feel rates have very little room to continue to improve and the likelihood of a correction which increases rates is growing. Remember lenders push rates higher much faster than they let them fall. In addition, we have the Employment Situation report coming out on Friday. This is one of the most influential economic releases on the schedule and it can impact the markets in a big way… especially if it is better than expected. There is much risk in floating and very little to gain. It is always better to have locked when you should have floated than to have floated when you should have locked.