Alex Wish Mortgage Blog

Category: Weekly Review

What’s Ahead For Mortgage Rates This Week : December 27, 2010

Existing Home Sales (Nov 2009 - Nov 2010)Mortgage markets worsened again last week as the holiday-shortened sessions did little to buck recent momentum. Although Freddie Mac reported mortgage rates dropping 0.02% from the week prior, loan officers on the street will report the opposite. Rates did not fall last week.

Conforming mortgage rates moved higher for 7th straight week.

For rate shoppers and home buyers, it’s been a harrowing two months.  

Since the Federal Reserve announced its QE2 program November 3, 2010, mortgage rates have moved from all-time lows to 7-month highs. Mortgage payments now cost $38 more per month per $100,000 borrowed as compared to the day before the stimulus was announced.

Mortgage rates look poised to increase again. Here’s why.

A major reason why mortgage rates were so low, for so long, was that the U.S. economy was suffering. Consumer spending was slow, business forecasts were dour, and job growth was negative. These conditions lasted for longer than a year.

Lately, however, the conditions are changing:

  • Consumer spending is up 5 months in a row (Bloomberg)
  • Fannie Mae is boosting its economic outlook for 2011 (WSJ)
  • Job growth is slow, but positive (Reuters)

And, furthermore, housing appears to be on solid ground. Existing Home Sales and New Home Sales improved last month, and home supplies are dropping. This, too, is good for the economy, which, in turn, is bad for mortgage rates.

This week, don’t be surprised is mortgage rates rise again. The week is again shortened by holiday and there’s a host of new data that may signal economic improvement including Pending Home Sales, consumer confidence surveys and the Case-Shiller Index.

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What’s Ahead For Mortgage Rates This Week : December 20, 2010

Fed Funds Rate vs Mortgage Rates (2000-2010)Mortgage markets worsened again last week as belief in a U.S. recovery and concerns for inflation took hold on Wall Street.  Conforming mortgage rates rose for the 6th straight week.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage is 0.66% higher this week as compared to rates on November 11, but loan originators will tell you that figure is understated.

Real mortgage rates — mortgage rates available to everyday homeowners and buyers are up by as much as a full percentage point since November, and loan costs are rising, too.

The Refi Boom of 2010 is over.

Last week, mortgage markets revolved around the Federal Open Market Committee. The FOMC met Tuesday and voted to leave the Fed Funds Rate unchanged within a target range of 0.000-0.250. This was expected. However, markets seemed to be surprised by the Fed’s take on inflation.

In its press release, the Fed said inflation is running too low to benefit the economy. Its policies, including the group’s $600 billion bond market program, may be meant to spark inflation, then. This would lead mortgage rates higher and Wall Street knows it.

Mortgage rates spiked after the Fed adjourned.

This week, with a sparse data schedule and trade volume thinning because of holidays, expect mortgage rates to be volatile.

Although rates are higher since 7 weeks ago, they remain low, historically. There’s still a chance to capitalize on the lowest mortgage rates in decades. If you haven’t refinanced this year and want to know what’s available, talk to your loan officer right away.

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What’s Ahead For Mortgage Rates This Week : December 13, 2010

Federal Reserve meets December 14 2010Mortgage markets worsened last week as the U.S. economy showed additional signs of strength; and global demand for mortgage bonds slipped.

Conforming mortgage rates rose around the country for the fifth straight week. It’s a streak that’s been marked by volatile pricing that’s rendered rate shopping difficult.

Last week, lenders published as many as 5 rate sheets per day where, by comparison, over the past 12 months, lenders have averaged closer to 2 rate sheets per day.

This week, with a bevy of data set for release and a Federal Open Market Committee meeting, expect volatility to remain high. Wall Street remains undecided on the future of the U.S. economy and there will be plenty on information on which to trade:

  • Tuesday : Producer Price Index, Retail Sales
  • Wednesday : Consumer Price Index, Housing Market Index
  • Thursday : Housing Starts, Initial and Continuing Jobless Claims

Despite the high impact of this week’s economic releases, though, it will be Tuesday’s FOMC meeting that sets the tone for the mortgage bond market and, consequently, for mortgage rates.

The Fed’s last meeting in early-November provided the spark to the recent rise in mortgage rates. In the group’s post-meeting press release, it acknowledged growth while committing $600 billion to bond markets. The move triggered a massive bond sell-off that has since pushed conforming mortgage rates to a 5-month high.

The Fed adjourns at 2:15 PM ET Tuesday afternoon.

If you’re still floating a mortgage rate or have otherwise yet to lock, consider executing a rate lock agreement early in the week. Once the Federal Open Market Committee adjourns, mortgage rates could spike again. And, although rates are up since November, they remain historically low.

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What’s Ahead For Mortgage Rates This Week : December 6, 2010

Unemployment Rate 2007-2010Mortgage markets lost ground last week on growing optimism for the economy, a poor run for the dollar versus the euro, plus the lingering concerns that inflation will grip the U.S. long-term.

Conforming mortgage rates rose for the fourth week in a row, stymying rate shoppers and raising the effective cost of homeownership for new buyers in need of a mortgage.

After a spectacular run that drew 30-year fixed rates to near 4.00, mortgage rates have returned to their highest levels since late-June.

Last week was heavy on news. Bond traders were hit with the Beige Book; with the ADP Challenger Report; with the ISM Manufacturing Report; and, with Pending Home Sales data for October. Each release moved markets.

Only Friday’s Non-Farm Payrolls report kept mortgage rates from really soaring.

According to the government, 39,000 net new jobs were created in November, and September’s and October’s data was revised higher by a combined 38,000.  The sum of these figures fell well short of Wall Street expectations — investors has expected 146,000 net new jobs in November.

As a result, mortgage rates made their largest, intra-day improvement of the year Friday morning, although they slid higher through the afternoon. Rates fell 1/8 percent Friday as compared to Thursday and rate shoppers may see that momentum carry forward into this week.

Fed Chairman Ben Bernanke gave a televised interview Sunday evening in which he said, among other things:

  1. “The fear of inflation is way overstated.”
  2. Additional bond market support is “certainly possible”.

Both comments should help to allay inflation concerns, and may lead mortgage rates lower this week. If you’re floating a mortgage rate, keep a watchful eye on markets and be especially wary if mortgage rates start to rise again. November was rough on mortgage bonds.

If December follows suit, expect mortgage rates to approach 6 percent.

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What’s Ahead For Mortgage Rates This Week : November 29, 2010

Unemployment Rate 2007-2010In a holiday-shortened week on Wall Street, mortgage markets improved on 3 of 4 days, but still posted its fourth consecutive losing week.

Unfortunately for rate shoppers and home buyers , last week’s 3 days of gains were mild improvements; the one day of deterioration was among the Top 10 worst days for mortgage bonds this year.

Mortgage rates are at their highest levels since mid-July. The Refi Boom is unwinding quickly.

Last week underscores the importance of the global community to the future of the U.S. mortgage market. Two of the main reasons why mortgage rates increased were non-domestic.

  1. Concerns for a full-blown North Korea/South Korea conflict lessened quickly
  2. The likelihood of a speedy, $85 billion bailout Ireland increased

The two events stemmed the typical safe-haven buying patterns that accompany geo-political and economic uncertainty, and drive down mortgage rates.

This week, mortgage rates may rise again.

First, Ireland’s bailout package was signed Sunday morning and that relieves some pressure on the European Union.  Second, this week’s economic releases should show that the U.S. economy is still expanding, and that U.S. consumers are still spending — both are tied to higher rates.

A sampling of the week’s releases include:

  • Tuesday : Case-Shiller Index; Consumer Confidence surveys
  • Thursday : Initial and Continuing Jobless Claims; Pending Home Sales
  • Friday : Non-Farm Payrolls; Unemployment Rate

If you haven’t locked a mortgage rate and are waiting for “the bottom”, remember that the mortgage market waits for no one. Rates are much higher since the start of November and look ready to rise even higher.  Call your loan officer and get your application in process this week.

The longer you wait, the higher that rates could go.

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What’s Ahead For Mortgage Rates This Week : November 22, 2010

CPI Oct 2009-2010Mortgage markets worsened last week as the U.S. dollar gave up ground in currency markets, and inflation concerns mounted. In response to the events, conforming mortgage rates rose for the third straight week.

Mortgage rates have now climbed by as much as half-percent since the start of the month, and Freddie Mac reports average loan fees to be higher, too.

The 7-month rally in rates may be nearing its end. The 30-year fixed rate mortgage is at a 4-month high after reaching an all-time low just 3 weeks ago.

The abrupt change in rates makes for an interesting study in expectations, and how they can influence a market.

Remember, inflation is bad for mortgage rates. Inflation devalues the dollar which, as a consequence, devalues repayments made to mortgage bond holders. As a result, when inflation is present, mortgage bonds tend to sell-off which causes mortgage rates to rise.

This is what’s been happening these past 3 weeks. However, we’re not in an inflationary environment. To the contrary:

  1. The Federal Reserve has said inflation is too low to be economically healthy
  2. Last week, the Cost of Living posted its lowest year-over-year gain in history

But mortgage rates are rising anyway. This is because global investors believe the Fed’s most recent market intervention — a $600 billion bond purchase program — will later lead to inflation. Just on the expectation, markets are behaving like inflation is already here.

This week is holiday-shortened, and rates should remain volatile. There’s a bevy of data including the Existing and New Home Sales reports, consumer confidence data, and the FOMC Minutes from the November 3 meeting.

If you haven’t locked a mortgage rate, consider locking one today. Rates have farther to climb than the fall.

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What’s Ahead For Mortgage Rates This Week : November 15, 2010

Inflation and mortgage ratesIn a holiday-shortened trading week, mortgage markets tanked last week, casting doubt on whether the bond market’s 7-month bull run will continue. Fears of inflation caused conforming mortgage rates to rise.

Last week marked the first sizable mortgage rate increase over the course of 7 days since April.

The biggest reason why rates rose last week was because of concerns that the Federal Reserve’s latest round of stimulus will devalue the U.S. dollar.

The Fed pledged an additional $600 billion to the bond markets two weeks ago and, to meet this obligation, the group will have to, quite literally, print new money.

It’s Supply and Demand. With more dollars in circulation, every existing dollar is worth less.

It’s also inflationary.

As the Fed’s pledge ties back to mortgage rates, remember that mortgage bondholders are paid in U.S. dollars. So, if those dollars are expected to be worth less in the future, we would expect mortgage bond demand to fall. And that’s exactly what happened last week — investors rarely clamor for assets whose value drops over time.

The falling demand dropped down prices, and pushed up yields. Mortgage rates spiked.

This week, the trend could continue. There’s a lot of inflation-signaling data on tap:

  • Monday : Retail Sales
  • Tuesday : Producer Price Index; Consumer Confidence; Housing Market Index
  • Wednesday : Consumer Price Index; Housing Starts
  • Thursday : Initial and Continuing Jobless Claims

Analysts are calling for lukewarm data this week; none of the releases is expected to show strong growth. If the analysts are wrong, look for rates to rise again.

Momentum is moving away from rate shoppers. If you’ve yet to lock in a rate, consider doing it now.

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What’s Ahead For Mortgage Rates This Week : November 8, 2010

Mortgage rates changing quicklyMortgage markets took a roller coaster ride last week, powered by the dual-force of the Federal Open Market Committee, and the government’s monthly Non-Farm Payrolls report.

As standalone events, both releases would have ranked among the top market movers of the year anyway, but throw in the rest of the week’s data –including the release of key inflation figures and the midterm elections — and it’s no wonder the bond markets were so bumpy.

Huge gains and losses characterized day-to-day trading last week. Overall, however, conforming mortgage rates improved; fixed-rate mortgage rates fell slightly less than adjustable-rate ones.

Recapping last week’s economic news:

  • Core PCE, the Fed’s preferred inflation gauge, posted a lower-than-expected 1.2% annual growth
  • The Federal Reserve announced a $600 billion package to support the economy; more than most estimates.
  • According to the government, 151,000 new jobs were created last month. Economists expected 61,000.

Additionally, the Institute for Supply Management’s Manufacturing Index showed strong sector growth.

With each new surprise, Wall Street’s expectations adjusted for the future and, therefore, mortgage rates changed. 

This week, the direction that rates take is anyone’s guess. First, there’s no substantive economic data due for release and, second, markets are closed Thursday for Veteran’s Day. The absence of data coupled with lower volume expected overall may mean that market momentum rules the week.

In other words, if mortgage markets open the week better, they may close the week better, too. Conversely, if rates start rising, they could rise by a lot.

If you’re still floating a mortgage rate or have yet to call your loan officer about a potential refinance, there’s no better time than the present. Mortgage rates are on a 6-month rally and most eligible homeowners stand to save a lot of money.

Make that call this week — just in case market momentum carries mortgage rates higher.

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What’s Ahead For Mortgage Rates This Week : November 1, 2010

FOMC meets this weekMortgage markets remained highly volatile for the second straight week last week. Yet, over the course of 5 days, mortgage bonds ended the week relatively unchanged.

Conforming rates worsened Monday, Tuesday and Wednesday — rising as much as 3/8 percent as compared to the week prior — before settling lower through Thursday and Friday.

On the week overall, 30-year fixed rates worsened, 15-year fixed held steady, and 5-year ARMs improved.

And despite all the data released last week, it wasn’t the fundamentals that were causing rates to move. Instead, Wall Street was firmly focused on the Federal Reserve’s scheduled 2-day meeting this week; preoccupied with the likelihood of new Fed stimulus program.

The Fed’s meeting adjourns Wednesday and the group is widely expected to announce a new round of bond market support at that time.  Uncertainty over how big that package will be, however, is what’s causing rates to jump.

Market estimates range from $250 billion to over $1 trillion and when Wall Street expectations shifts toward the lower end of that range, mortgage rates have been rising. When expectations shifts toward the upper range, mortgage rates have been falling.

This is why it’s all eyes on the Fed this week. Once the Fed adjourns, there’s no more “expectation” — there’s only Fed commitment.

Other than the Federal Reserve’s get-together, there isn’t much new data due for release. The week’s calendar looks like this:

  • Monday : Personal Income and Spending reports
  • Wednesday : FOMC adjourns from its 2-day meeting
  • Thursday : Initial and continuing jobless claim data
  • Friday : Pending Home Sales, Jobs Report, Unemployment Rate

It’s unlikely that data will swing mortgage rates until after the Fed’s Wednesday adjournment, but, once that happens, expect bond market attention to shift to the October jobs report set for 8:30 AM ET release Friday morning.  If jobs data is strong, mortgage rates should rise.

All things considered, it’s dangerous to float a mortgage rate this week. If you’re not already locked, talk to your loan officer prior to Wednesday afternoon.

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What’s Ahead For Mortgage Rates This Week : October 25, 2010

Existing Home Sales (Aug 2009-August 2010)Mortgage markets improved last week overall, but barely. After making a sizable move lower through Monday, Tuesday and Wednesday, mortgage pricing jumped Thursday and Friday. Nearly all of the early-week gains were erased.

Conforming mortgage rates ended the week slightly improved.

There wasn’t much economic news on which for markets to trade last week. In its absence, bond traders took cues from the currency markets, among other things.

Mortgage rates are closely tied to the value of the U.S. dollar. This is because mortgage bond investors are repaid in U.S. dollars and, as the dollar gains value, demand for dollar-denominated bonds tend to grow.

More demand for bonds raises prices which, in turn, lowers rates.

Bond prices and bond yields move in opposite directions.

The dollar was strong in the first part of last week, then weakened through Friday’s close with the G-20 meeting looming.  Mortgage rates trended along similar lines.

This week, there’s a return to data and mortgage markets should respond — especially because the week is housing-data heavy. Housing is believed to be a key part of the country’s ongoing economic recovery.

  • Monday : Existing Home Sales
  • Tuesday : Case-Shiller Index, Consumer Confidence, Home Price Index
  • Wednesday : New Home Sales
  • Thursday : Initial and Continuing Jobless Claims

Mortgage rates are near all-time lows and it’s unclear whether they’ll stay this low, or start rising. Either way, if you haven’t talked to your loan officer about a refinance at today’s great pricing, set aside some time this week to do that.

Once rates reverse higher, they’re unlikely to fall back down.

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