Mortgage Rates Rise Ahead of Employment Data
Posted 01-08-2010 at 08:21 AM by VictorBurek
Mortgage rates continued to be pressured higher yesterday and this morning as market participants await the employment data. All lenders did reprice for the worse as mortgage backed securities fell for the third consecutive day.
Enough about yesterday. This morning the Department of Labor released the Employment Situation report. This data is the single most important economic report released on a monthly basis. Higher unemployment leads to less consumer spending which benefits low consumer borrowing costs. Economists surveyed prior to the release expected our economy to have added jobs in December ending a streak of 2 years of negative job growth. The expectations of a positive report had pressure mortgage rates higher over the last couple days.
The release indicated that our economy lost many more jobs than expected in December. Non farm payrolls declined by 85,000 jobs with the prior month’s number revised from a first reported loss of 11,000 to post a gain of 4000 jobs. Our nation’s unemployment rate held steady at 10%. The average work week also held steady at 33.2 hours while average weekly earnings rose an expected 0.2%. Following this worse than expected data, the fixed income sector has begun to rally recapturing much of the losses over the prior couple days.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from the reprised for the worse rate sheets that hit our inboxes yesterday. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers. To secure a par 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 an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par rate in the 4.375% to 4.625% range with similar fees. You may elect to pay less in upfront charges but you will have to accept a higher interest rate.
Floating into this report was a very risky strategy. If you have not locked your rate yet, than my advice is to continue to cautiously float for a few reasons. First, I have never been a fan of locking on a Friday as lenders tend to be somewhat conservative on pricing. They don’t know what might happen over the weekend which can affect the markets come Monday morning. Secondly, we don’t have any key economic data due out until late next week when we receive the Retail Sales report and consumer inflation news. Finally, today’s employment data was pretty bad when compared to expectations and I feel it is worth the risk of floating to allow time for the data to sink in.
Whenever you are floating, you must evaluate by day’s end what rate you can lock and with what fees. If you are happy with what you can secure than go ahead and lock. Locking a rate removes all risk of higher rates and allows you to sleep better. MBS have rallied following the data this morning but they have ran into overhead resistance which has preventing further gains.
Have a great weekend!
Enough about yesterday. This morning the Department of Labor released the Employment Situation report. This data is the single most important economic report released on a monthly basis. Higher unemployment leads to less consumer spending which benefits low consumer borrowing costs. Economists surveyed prior to the release expected our economy to have added jobs in December ending a streak of 2 years of negative job growth. The expectations of a positive report had pressure mortgage rates higher over the last couple days.
The release indicated that our economy lost many more jobs than expected in December. Non farm payrolls declined by 85,000 jobs with the prior month’s number revised from a first reported loss of 11,000 to post a gain of 4000 jobs. Our nation’s unemployment rate held steady at 10%. The average work week also held steady at 33.2 hours while average weekly earnings rose an expected 0.2%. Following this worse than expected data, the fixed income sector has begun to rally recapturing much of the losses over the prior couple days.
Reports from fellow mortgage professionals indicate lender rate sheets to be improved from the reprised for the worse rate sheets that hit our inboxes yesterday. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers. To secure a par 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 an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par rate in the 4.375% to 4.625% range with similar fees. You may elect to pay less in upfront charges but you will have to accept a higher interest rate.
Floating into this report was a very risky strategy. If you have not locked your rate yet, than my advice is to continue to cautiously float for a few reasons. First, I have never been a fan of locking on a Friday as lenders tend to be somewhat conservative on pricing. They don’t know what might happen over the weekend which can affect the markets come Monday morning. Secondly, we don’t have any key economic data due out until late next week when we receive the Retail Sales report and consumer inflation news. Finally, today’s employment data was pretty bad when compared to expectations and I feel it is worth the risk of floating to allow time for the data to sink in.
Whenever you are floating, you must evaluate by day’s end what rate you can lock and with what fees. If you are happy with what you can secure than go ahead and lock. Locking a rate removes all risk of higher rates and allows you to sleep better. MBS have rallied following the data this morning but they have ran into overhead resistance which has preventing further gains.
Have a great weekend!
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