Mortgage Rates Move Lower
Posted 09-10-2009 at 08:11 AM by VictorBurek
Well the theme for the week continued yesterday with mortgage rates being contained within a narrow trading range. The lack of economic data to move the markets kept the trading activity well below average. We saw very little volatility but following the successful auction of 10 year treasury notes, mortgage backed securities did manage to post a small gain by day’s end. The improvement in price of MBS did not warrant reprices from lenders that would lower consumer borrowing costs.
We did receive a couple pieces of economic data this morning. The first release came from the U.S. Department of Labor with the Weekly Jobless Claims. This weekly report totals the number of Americans that filed for first time unemployment benefits in the prior week. Included within this report is the continuing claims which totals the number of Americans that continue to file for benefits due to the lack of finding a new job. Since our economy is driven by consumer spending, market participants are very interested in knowing how many Americans are without jobs. Higher unemployment leads to less consumer spending which makes it difficult for our economy to grow. The fixed income sector which includes MBS and treasuries generally improves with higher than expected numbers. The report indicates that first time claims last week fell by 26,000 which is slightly better than what was expected by economists. In addition, the continuing claims also fell by more than expected to 6.088 million from 6.24million last week. Jobless claims remain stubbornly high but is showing signs of easing pressure in the labor market. Mitigating some of the positivity with this report is the talk that much of the decline in continuing claims is being attributed to Americans losing benefits rather than finding a job.
The U.S. Department of Commerce released the monthly Trade Balance or as many refer to it the Trade Imbalance numbers which shows the difference in dollars between what our nation imports and exports. The report shows that our nations trade gap in July increased more than expected to -$32.0billion. Imports increased by a record 4.7% while our exports only posted a 2.2% gain. The big increase in imports is being attributed to government stimulus, notably the cash for clunkers program, which increased demand for autos. With that program now being over, it will be interesting to see how imports post next month. To read more, click here. Following the release of this report and the weekly jobless numbers, MBS have moved higher.
At 1pm eastern, the U.S. Department of Treasury will hold its final auction of the week with $12billion of 30 year bonds be offered to the highest bidder. Yesterday’s auction of $20billion of 10 year notes saw very strong demand which helped MBS to post modest gains in price. This strong demand for our nation’s debt helps to keep mortgage rates low.
We also get a few speeches by key players in our government. Treasury Secretary Tim Geithner will be testifying to Congress on the TARP program. In addition, Atlanta Federal Reserve Bank President Dennis Lockhart will deliver a speech on U.S and global economic interactions and Federal Reserve Vice Chairman Donald Kohn speaks on U.S. monetary policy. Anytime these officials speak, market participants will pay attention for any hint on future monetary policy and their outlook on the economy.
Early reports from fellow mortgage professionals are indicating that mortgage rates are improved over yesterday. The par 30 year conventional rate mortgage is now in the 4.75% to 5.00% 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. If you are looking to access equity in your home, expect either a higher interest rate or additional fees. Typically, equity loans are .125% to .25% higher than a regular purchase or refinance mortgage without paying the additional fees.
If you are closing within the next 30 days, I would recommend that you lock today. We are seeing the best rates sheets since early this summer and if you have been floating you improved your rate. You have to know when to take your chips off the table and secure your winnings. MBS have moved above the recent range that has kept them contained but that is no guarantee that they will continue to move higher in price which lowers mortgage rates. Remember, rates move higher much quicker than they will move lower.
We did receive a couple pieces of economic data this morning. The first release came from the U.S. Department of Labor with the Weekly Jobless Claims. This weekly report totals the number of Americans that filed for first time unemployment benefits in the prior week. Included within this report is the continuing claims which totals the number of Americans that continue to file for benefits due to the lack of finding a new job. Since our economy is driven by consumer spending, market participants are very interested in knowing how many Americans are without jobs. Higher unemployment leads to less consumer spending which makes it difficult for our economy to grow. The fixed income sector which includes MBS and treasuries generally improves with higher than expected numbers. The report indicates that first time claims last week fell by 26,000 which is slightly better than what was expected by economists. In addition, the continuing claims also fell by more than expected to 6.088 million from 6.24million last week. Jobless claims remain stubbornly high but is showing signs of easing pressure in the labor market. Mitigating some of the positivity with this report is the talk that much of the decline in continuing claims is being attributed to Americans losing benefits rather than finding a job.
The U.S. Department of Commerce released the monthly Trade Balance or as many refer to it the Trade Imbalance numbers which shows the difference in dollars between what our nation imports and exports. The report shows that our nations trade gap in July increased more than expected to -$32.0billion. Imports increased by a record 4.7% while our exports only posted a 2.2% gain. The big increase in imports is being attributed to government stimulus, notably the cash for clunkers program, which increased demand for autos. With that program now being over, it will be interesting to see how imports post next month. To read more, click here. Following the release of this report and the weekly jobless numbers, MBS have moved higher.
At 1pm eastern, the U.S. Department of Treasury will hold its final auction of the week with $12billion of 30 year bonds be offered to the highest bidder. Yesterday’s auction of $20billion of 10 year notes saw very strong demand which helped MBS to post modest gains in price. This strong demand for our nation’s debt helps to keep mortgage rates low.
We also get a few speeches by key players in our government. Treasury Secretary Tim Geithner will be testifying to Congress on the TARP program. In addition, Atlanta Federal Reserve Bank President Dennis Lockhart will deliver a speech on U.S and global economic interactions and Federal Reserve Vice Chairman Donald Kohn speaks on U.S. monetary policy. Anytime these officials speak, market participants will pay attention for any hint on future monetary policy and their outlook on the economy.
Early reports from fellow mortgage professionals are indicating that mortgage rates are improved over yesterday. The par 30 year conventional rate mortgage is now in the 4.75% to 5.00% 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. If you are looking to access equity in your home, expect either a higher interest rate or additional fees. Typically, equity loans are .125% to .25% higher than a regular purchase or refinance mortgage without paying the additional fees.
If you are closing within the next 30 days, I would recommend that you lock today. We are seeing the best rates sheets since early this summer and if you have been floating you improved your rate. You have to know when to take your chips off the table and secure your winnings. MBS have moved above the recent range that has kept them contained but that is no guarantee that they will continue to move higher in price which lowers mortgage rates. Remember, rates move higher much quicker than they will move lower.
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