Mortgage markets improved last week to the delight of chicago rate shoppers.
Against a sparse economic calendar, Wall Street turned its attention to geopolitics in Greece and the Eurozone. It didn’t like what it saw. Safe haven buying buoyed mortgage bond markets last week as pricing recaptured two-thirds of its monumental losses from the week prior.
Despite last week’s surge, however, conforming and FHA mortgage rates remain near their worst levels of the year and appear poised to increase throughout the summer months.
The U.S. economy is improving. From last week:
Pending Home Sales posted a strong monthly improvement
Wholesale Trade data pointed to higher consumer spending ahead
Inflationary threats on the economy are receding, according to the Fed
Furthermore, continuing jobless claims were down again.
Good news for the economy is generally bad news for mortgage rates. Last week, that wasn’t the case because of Wall Street’s want for “safe” assets right now. This includes mortgage bonds and is helping to keep consumer rates low. When the safe haven buying eases, rates should climb.
Meanwhile, this week, the calendar is back-heavy.
There’s no real data until Wednesday’s Consumer Price Index, and then there’s a flurry of new releases through Friday’s market close including Retail Sales, Consumer Confidence and Housing Starts.
Strength in these issues should push mortgage rates back up.
If you’re floating or shopping a loan right now, be wary of market volatility. Rates have been jumpy since April 1 and mortgage rates are changing quickly. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.
Wednesday, April 14, 2010
Tuesday, April 13, 2010
MORTGAGE RATES HOLD STRONG
Mortgage rates spent all last week attempting to recover from a few weeks of bad news in the bond market. We went home on Friday afternoon in good spirits as rates were seen at their best levels since the week before the Fed exited the mortgage backed securities market.
The week ahead is very busy with many economic reports, Federal Reserve speakers, and the kick-off of earnings season. Typically during corporate earnings season, strong reports lead to a stock market rallies which unfortunately come at the expense of bonds. The opposite generally occurs when earnings are worse than expected. Earnings season kicks off today after the closing bell with Alcoa reporting. Beyond that mortgage rates will battle a full economic data calendar which is anticipated to show continued improvement in the manufacturing sector, a more content consumer, tame inflation, and more weak housing starts and building permits numbers.
Here are a few highlights for the week:
Monday
Open of earnings season. Alcoa reports after the bell
Tuesday
International Trade (low to medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
Import and Export Prices (low to medium impact)
Wednesday
Weekly Mortgage Applications Index (low impact)
JP Morgan Earnings
Consumer Price Index, measures inflation on the consumer level (medium to high impact)
Retail Sales (medium to high impact) If sales figures are strong, that is a sign of economic expansion which will pressure mortgage rates higher. As a general rule, positive economic news is bad for mortgage rates while bad economic news is good for mortgage rates.
Beige Book, This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. (medium impact)
Ben Bernanke speaks on the Economic Outlook (medium to high impact)
Thursday
Weekly Jobless claims (medium impact)
Empire State Manufacturing Survey (medium impact)
Industrial Production, which is a measure of the strength of the manufacturing sector by measuring the output at U.S. factories, utilities and mines. Higher industrial production would be a positive economic indicator which would benefit the stock market at the expense of the fixed income sector. (high impact)
Philadelphia Fed Survey (low impact)
Friday
Housing Starts which estimates how much new residential real estate construction occurred in the previous month. (medium to high impact)
Bank of America Earnings
Consumer Sentiment (medium impact)
READ MORE for a more detailed look at the Week Ahead
When the day began, lender rate sheets were very similar where they were set on Friday, however both benchmark Treasury yields and mortgage-backed security prices have rallied throughout the session. This has allowed several lenders to reprice for the better. The par 30 year conventional rate mortgage is still holding in the 5.0% to 5.25% range for well qualified consumers though. 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. For consumers with lower FICO scores and higher loan to values, you should consider a government FHA loan. FHA loans have similar rates to conventional loans but do come with higher costs.
The week ahead is very busy with many economic reports, Federal Reserve speakers, and the kick-off of earnings season. Typically during corporate earnings season, strong reports lead to a stock market rallies which unfortunately come at the expense of bonds. The opposite generally occurs when earnings are worse than expected. Earnings season kicks off today after the closing bell with Alcoa reporting. Beyond that mortgage rates will battle a full economic data calendar which is anticipated to show continued improvement in the manufacturing sector, a more content consumer, tame inflation, and more weak housing starts and building permits numbers.
Here are a few highlights for the week:
Monday
Open of earnings season. Alcoa reports after the bell
Tuesday
International Trade (low to medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
Import and Export Prices (low to medium impact)
Wednesday
Weekly Mortgage Applications Index (low impact)
JP Morgan Earnings
Consumer Price Index, measures inflation on the consumer level (medium to high impact)
Retail Sales (medium to high impact) If sales figures are strong, that is a sign of economic expansion which will pressure mortgage rates higher. As a general rule, positive economic news is bad for mortgage rates while bad economic news is good for mortgage rates.
Beige Book, This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. (medium impact)
Ben Bernanke speaks on the Economic Outlook (medium to high impact)
Thursday
Weekly Jobless claims (medium impact)
Empire State Manufacturing Survey (medium impact)
Industrial Production, which is a measure of the strength of the manufacturing sector by measuring the output at U.S. factories, utilities and mines. Higher industrial production would be a positive economic indicator which would benefit the stock market at the expense of the fixed income sector. (high impact)
Philadelphia Fed Survey (low impact)
Friday
Housing Starts which estimates how much new residential real estate construction occurred in the previous month. (medium to high impact)
Bank of America Earnings
Consumer Sentiment (medium impact)
READ MORE for a more detailed look at the Week Ahead
When the day began, lender rate sheets were very similar where they were set on Friday, however both benchmark Treasury yields and mortgage-backed security prices have rallied throughout the session. This has allowed several lenders to reprice for the better. The par 30 year conventional rate mortgage is still holding in the 5.0% to 5.25% range for well qualified consumers though. 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. For consumers with lower FICO scores and higher loan to values, you should consider a government FHA loan. FHA loans have similar rates to conventional loans but do come with higher costs.
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