Mortgage Rates Hold Steady as Summer Session Ends
Posted 09-08-2009 at 08:09 AM by VictorBurek
Mortgage backed securities moved lower Friday following the release of the Employment Situation report. The downward move was not huge and there were no reports of reprices for the worse. The ever so important jobs data which has the ability to cause a major move in the markets turned out to be a non event. All in all, MBS closed Friday about where they closed on the Monday prior marking the longest stretch of time that mortgage rates have held sub 5% since early this year.
Summer vacation is over on Wall Street, politicians have returned to Washington(too bad they can’t stay on vacation forever) and most Americans got to enjoy a three day weekend. Time to get back to work. The week ahead is extremely light with economic data. The most impactful events taking place this week will be three Treasury auctions.
The only relevant event taking place today is the first round of Treasury auctions for the week. The U.S. Department of Treasury will auction off $38billion in 3 year notes to the highest bidder at 1pm eastern. As always with auctions, the supply is known in advance so market participants will look at the results of the auction to grade its success. High demand, especially from foreign investors, is what is needed to call a auction successful. So far this year, even though there has been record amount of treasuries offered, demand has remained quite strong. This strong demand for our nation’s debt has helped keep mortgage rates low.
Tomorrow, the Treasury Department will auction off $20billion in 10 year notes and Thursday the auctions end with $12billion of 30 year bonds being offered to the highest bidder.
So not much in the form of economic reports to move the markets this week. With Wall Street traders returning to work today and replacing the second string which has manned the trading desks over the summer, it will be interesting to see how the markets move. Will the bulls drive the markets higher betting that our economy is on the path to recovery and healthy economic growth which will pressure mortgage rates higher, or will the bears who believe that our economy is not healthy yet and still due for a corrective move lower which will help to keep mortgage rates low win the battle? What is your opinion on this subject? Overseas, markets have rallied over the last couple days and our own stock market is poised for a move higher today. It is quite typical to see the fixed income sector move in opposite direction of stocks. So with the stock market moving higher, pressure will be applied to MBS to move lower in price which could increase mortgage rates.
Early reports from fellow mortgage professionals show that the par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for the best qualified consumer. In order to qualify for 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 associated with the loan including one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and secure a higher interest rate or you can pay additional fees to buy down the interest rate. Typically each additional discount point paid will buy your interest rate down by .25%. I only advise the paying of discount points when the client is positive that they will keep the subject property for at least five years. If you are not sure that you will keep your home for 5 years or longer, than you should not pay any additional points beyond the first one to buy the rate lower.
Quite often I get asked by consumers how to compare offers from two different lenders. I am a big fan of the KISS program, or Keep It Super Simple. If you are comparing two good faith estimates, look at the 800 lines. This is where you will find the lender fees and the fees charged by the loan officer completing the transaction. The remainder of the good faith estimate should be relatively the same regardless of who you pick to complete your transaction. The 1000 lines are used to establish an escrow account and will be the same regardless of the lender. This section will be based on how much your home owners insurance and property taxes are for the year. The 1100 lines are the title charges. These are the fees the title company charges to complete the closing of your transactions. Some title companies are less expensive than others, but these fees should be very close from one lender to the next. None of the title fees can go to the loan officer completing your loan. So, when comparing offers Keep It Super Simple and look at the 800 lines only.
Summer vacation is over on Wall Street, politicians have returned to Washington(too bad they can’t stay on vacation forever) and most Americans got to enjoy a three day weekend. Time to get back to work. The week ahead is extremely light with economic data. The most impactful events taking place this week will be three Treasury auctions.
The only relevant event taking place today is the first round of Treasury auctions for the week. The U.S. Department of Treasury will auction off $38billion in 3 year notes to the highest bidder at 1pm eastern. As always with auctions, the supply is known in advance so market participants will look at the results of the auction to grade its success. High demand, especially from foreign investors, is what is needed to call a auction successful. So far this year, even though there has been record amount of treasuries offered, demand has remained quite strong. This strong demand for our nation’s debt has helped keep mortgage rates low.
Tomorrow, the Treasury Department will auction off $20billion in 10 year notes and Thursday the auctions end with $12billion of 30 year bonds being offered to the highest bidder.
So not much in the form of economic reports to move the markets this week. With Wall Street traders returning to work today and replacing the second string which has manned the trading desks over the summer, it will be interesting to see how the markets move. Will the bulls drive the markets higher betting that our economy is on the path to recovery and healthy economic growth which will pressure mortgage rates higher, or will the bears who believe that our economy is not healthy yet and still due for a corrective move lower which will help to keep mortgage rates low win the battle? What is your opinion on this subject? Overseas, markets have rallied over the last couple days and our own stock market is poised for a move higher today. It is quite typical to see the fixed income sector move in opposite direction of stocks. So with the stock market moving higher, pressure will be applied to MBS to move lower in price which could increase mortgage rates.
Early reports from fellow mortgage professionals show that the par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for the best qualified consumer. In order to qualify for 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 associated with the loan including one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and secure a higher interest rate or you can pay additional fees to buy down the interest rate. Typically each additional discount point paid will buy your interest rate down by .25%. I only advise the paying of discount points when the client is positive that they will keep the subject property for at least five years. If you are not sure that you will keep your home for 5 years or longer, than you should not pay any additional points beyond the first one to buy the rate lower.
Quite often I get asked by consumers how to compare offers from two different lenders. I am a big fan of the KISS program, or Keep It Super Simple. If you are comparing two good faith estimates, look at the 800 lines. This is where you will find the lender fees and the fees charged by the loan officer completing the transaction. The remainder of the good faith estimate should be relatively the same regardless of who you pick to complete your transaction. The 1000 lines are used to establish an escrow account and will be the same regardless of the lender. This section will be based on how much your home owners insurance and property taxes are for the year. The 1100 lines are the title charges. These are the fees the title company charges to complete the closing of your transactions. Some title companies are less expensive than others, but these fees should be very close from one lender to the next. None of the title fees can go to the loan officer completing your loan. So, when comparing offers Keep It Super Simple and look at the 800 lines only.
Total Comments 0
