Mortgage Rates Under Pressure
Posted 02-10-2010 at 07:51 AM by VictorBurek
A weak treasury auction of $40billion of 3 year notes pressured mortgage rates a few basis points higher yesterday. Not helping the cause of low rates was a rally in the stock market which posted healthy gains yesterday due to a report that the European Union is poised to help Greece with their ballooning national debt. There were a couple reports of lenders repricing for the worse but many lenders left rate sheets unchanged on the day.
This morning the Mortgage Bankers’ Association released their weekly Applications Index. This weekly report shows the weekly change in the amount of mortgage applications at major lenders. Increasing trends in applications is a positive economic indicator. More purchase applications should lead to more home sales which also increases sales of furniture, flooring, etc… and can lead to new construction jobs. More refinance activity is also a positive indicator as home owners refinance to lower payments freeing up cash flow which can be spent into the economy. Historically speaking this report is not high impacting on the markets, but with housing being so crucial to our overall economic activity market participants are paying more attention to it. The released indicated purchase applications fell 7% last week while the refinance activity posted a 1.3% increase.
The final report for the day was the International Trade report. This data measures the monthly difference between what our nation imports and exports. The report showed that our trade deficit widened much more than expected to $40.2billion from $36.4billion last month. Economists had forecasted a decline in our trade deficit to $35.8billion. The main cause of the wider trade gap was the recent rise of oil prices which have since declined indicating next month’s report should show some narrowing. One positive from the report was an increase in exports, which can lead to more jobs here, for the eight consecutive monthly gain.
At 1pm eastern, the Department of Treasury will conduct another round of auctions offering $25billion of 10 year notes. Weak demand for our nation’s debt will continue to pressure mortgage rates higher, while strong demand will help rates hold steady. Yesterday’s auction of 3 year notes was met with weak demand. Hopefully today’s auction has better results as the 10 year note is more relevant to mortgage rates as the life of a mortgage is much closer to 10 years than 3 years.
Due to snow, Fed Chairman Ben Bernanke’s testimony to the House Financial Services Committee has been postponed. His prepared remarks will be released at 10am eastern.
Continued weakness this morning has led to higher borrowing costs. Reports from fellow mortgage professional indicate the par 30 year conventional rate mortgage remains in the 4.75% to 5.00% 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 par in the 4.25% to 4.50% range with similar costs.
With most lenders still offering par at 4.75%, I will continue to advice locking.
This morning the Mortgage Bankers’ Association released their weekly Applications Index. This weekly report shows the weekly change in the amount of mortgage applications at major lenders. Increasing trends in applications is a positive economic indicator. More purchase applications should lead to more home sales which also increases sales of furniture, flooring, etc… and can lead to new construction jobs. More refinance activity is also a positive indicator as home owners refinance to lower payments freeing up cash flow which can be spent into the economy. Historically speaking this report is not high impacting on the markets, but with housing being so crucial to our overall economic activity market participants are paying more attention to it. The released indicated purchase applications fell 7% last week while the refinance activity posted a 1.3% increase.
The final report for the day was the International Trade report. This data measures the monthly difference between what our nation imports and exports. The report showed that our trade deficit widened much more than expected to $40.2billion from $36.4billion last month. Economists had forecasted a decline in our trade deficit to $35.8billion. The main cause of the wider trade gap was the recent rise of oil prices which have since declined indicating next month’s report should show some narrowing. One positive from the report was an increase in exports, which can lead to more jobs here, for the eight consecutive monthly gain.
At 1pm eastern, the Department of Treasury will conduct another round of auctions offering $25billion of 10 year notes. Weak demand for our nation’s debt will continue to pressure mortgage rates higher, while strong demand will help rates hold steady. Yesterday’s auction of 3 year notes was met with weak demand. Hopefully today’s auction has better results as the 10 year note is more relevant to mortgage rates as the life of a mortgage is much closer to 10 years than 3 years.
Due to snow, Fed Chairman Ben Bernanke’s testimony to the House Financial Services Committee has been postponed. His prepared remarks will be released at 10am eastern.
Continued weakness this morning has led to higher borrowing costs. Reports from fellow mortgage professional indicate the par 30 year conventional rate mortgage remains in the 4.75% to 5.00% 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 par in the 4.25% to 4.50% range with similar costs.
With most lenders still offering par at 4.75%, I will continue to advice locking.
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