Mortgage Rates Continue Rise on Consumer Sentiment in Spite of QEII
November 12, 2010 by Dan Hartman · 2 Comments
Consumer sentiment rises slightly in early November, inflation expectations to 3.0%; Fed begins purchases of medium-term securities today, to continue through December on current round – Mortgage Rate Update for November 12th, 2010
Mortgage pricing has worsened each day this week, and today isn’t any better, with average pricing about .25 points higher for most rates. Since last Wednesday’s Fed announcement, mortgage pricing is over 1.25 points worse, and average rates are creeping up, although this week’s Freddie Mac survey doesn’t quite reflect that yet. Freddie reported the average 30-year fixed rate at 4.17% with 0.8 points this week, substantially lower than average published rates from most lenders, especially in the latter half of the week.
Consumer sentiment was reported by the University of Michigan this morning. Consumer sentiment is a measure of the degree of confidence consumers have in the economy, and is intended to measure their willingness to spend in the immediate future. The measure was reported at 69.3 this morning, up from the prior reading of 67.6 and slightly above analyst expectations of a reading at 69.0 It is still substantially lower than the most recent high point, June 2009′s 76.0.
In addition to measuring consumers’ feelings about the economy in general, the Consumer sentiment survey also asks consumers about their price expectations to gauge inflation. At present, consumers are expecting about 3% inflation in the coming year, as fuel and food prices pressure wallets.
The bigger issue affecting markets this week has been the increasingly contentious discussion about US vs. China monetary policy at the G-20 Economic Summit in Seoul, Korea. The dispute is nothing new – the US has been saying for years that China is keeping its currency from appreciating, which would make Chinese exports more expensive. Conversely, China has complained about the US’ expansionary monetary policy, especially including the recent Federal Reserve announcement of additional security purchases.
This presents a substantial challenge to China – for it to maintain its currency even with current value relative to the dollar, it needs to print additional yuan to keep up with the increasing number of dollars in circulation. The dispute has been weakening the dollar causing pressure on US interest rates.
Mortgage pricing has worsened for the past 5 days, and shows no signs of stopping. Next week could bring some relief, if inflation remains controlled, as we will get a reading on inflation, and that could cool the current sell-off in long-term fixed income. Floating has become somewhat unattractive, but for loans already mired in a float strategy, the best thing to do at this point may be to ride it out. I don’t think we’ve seen the last of the good rates, but it may be a little while before they turn around. At this point, if you like your rate, lock it. If you don’t, there could be enough gains from floating to justify the risk.
Next week is clearly much busier than this from the perspective of economic data, and that could be good for rates. It could just be a brief respite before the cliff, though. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
Strong Jobs Growth in October Fails to Lower Unemployment
November 5, 2010 by Dan Hartman · 1 Comment
Private employers add 159,000 positions; Government employment cuts continue; Unemployment flat at 9.6% – Daily Mortgage Rate Update for November 5th, 2010
After all the other news this week, the Fed meeting results, more quantitative easing, etc., I believe that Wall Street actually yawned this morning at 8:30 when the Employment Situation report was released. Traders are looking for signs that the Fed might change directions, and this report, while exceeding expectations, didn’t have the kick needed.
Non-farm employers added 151,000 positions in October, a substantial jump from declines previously announced for August and September. Gains were strongest among private, non-government employers who added 159,000 positions. This sector has been viewed as key to moving employment in the economy forward. Government is unlikely to increase its hiring any time soon, especially with the potential for gridlock between Capitol Hill and the White House.
In addition to the strong October gains, August and September results were revised higher, erasing 90,000 prior job losses in those months.
These results were not strong enough to move the 9.6% unemployment rate.
Mortgage pricing has opened weaker this morning, and is likely to remain week throughout the day. Prices for most rates have risen by about 3/8 point. It is important to note that today’s results are a single data point following a large number of less positive data. This provides some support to the strategy of floating longer term rate locks. I would suggest locking rates on loans due to close within 30 days. I don’t feel we’ve seen the last of yesterday’s pricing levels, though. It is still safe to float longer locks.
Next week will be much quieter than this from an economic data perspective. We will see significant tests of Treasury pricing, with $72 billion going into the hopper. Apart from that, there’s not much to see.If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
Statistically Evaluating the Jobs Report – A Prediction for Friday November 5th
November 4, 2010 by Dan Hartman · Leave a Comment
Because the ADP Private Payrolls report, and the Bureau of Labor Statistics Employment Situation report both seek to measure the same economic variables, I hypothesized there should be a statistically significant relationship between the results of the two reports. A secondary hypothesis exists and suggests that it may be possible to use the ADP data, traditionally released on the Wednesday preceding the first Friday of each month, to predict the outcome of the Employment Situation report, released the first Friday of each month. With the assistance of Providence College student and Province Mortgage Associates intern Thomas Khoudary, initial results of the ADP and BLS reports from November 2005 through October 2010. Using statistical analysis tools, the following results were found.
Data used were initial results of the two surveys. While data are adjusted in subsequent months as additional information becomes available, I believe that the second goal of this project, to devise a method of predicting the Employment Situation report based on the ADP report, suggests that the initial data are more relevant to that purpose.
The ADP Private Payrolls report was believed to be most closely correlated to the Private Employment component of the Employment Situation report. Analyzing the data, substantial correlation was found, with a coefficient of correlation over 0.86. This indicates that the relationship believed to exist between the two surveys is present. Correlation analysis was also performed on the relationship between ADP and Total Payrolls. Surprisingly, a coefficient of correlation over 0.88 was found. Curiously, this suggests that the total employment situation is more closely related to the ADP survey than its sub-component private payrolls, that was expected to closely mirror the ADP results.
A regression analysis was performed on the data. The results show strong significance of the previously identified correlation, with a significance factor lower than .0001 for both ADP to Private Payrolls and ADP to Total Payrolls. This suggests that there is indeed a strong relationship between the two reports. Based on the regression analysis, I have derived a function I will use to predict the results of tomorrow’s Employment Situation report.
To predict the results of tomorrow’s jobs report, regressions of the employment data for the past 5 years and for the past 10 months were performed. The regressions over the greater period resulted in lower results, 15,526 private payroll jobs, and 28,004 total jobs. The 10-month regressions resulted in higher figures, 102,689 private jobs and 125,050 total jobs based on this Wednesday’s reported 43,000 private jobs added according to ADP.
After evaluating the available data, I believe that tomorrow’s Employment Situation report will show a gain of 73,000 jobs through private employers. Overall, the economy will add only 60,000 jobs, as a decrease in government employment will be a drag on other results. These results should provide some stability for mortgage rates.
My evaluation of this data is a relatively new undertaking. I anticipate these results will be refined over time. There is clearly a connection between the two reports, as was expected. Future evaluation should reveal more about this relationship.
Dan Hartman is a Senior Mortgae Advisor with Provice Mortgage Associates of Providence, RI, and has more than 10 years experience in the mortgage industry. He also serves as an Adjunct Professor of Finance and Economics with Roger Williams University and the University of New Haven. Extensive data was researched and compiled by Thomas Khoudary of Providence College.
Fed Acts, Mortgage Markets React
November 4, 2010 by Dan Hartman · 3 Comments
Fed to buy $600 billion in medium term Treasuries; Mortgage rates react sharply, briefly; Unemployment claims back up; Employment situation due tomorrow
The long-awaited Federal Reserve Open Markets Committee meeting concluded yesterday, and the worst-kept secret in financial markets was revealed. The Fed views the economy as growing insufficiently quickly to correct its biggest problem – unemployment. It’s action? Over the next 9 months, the Fed has committed to purchase $600 billion in medium term Treasury securities.
Here’s how this works. The Federal Reserve Bank of New York will utilize its connections on Wall Street to acquire these Treasury securities, and will, in theory, print an extra $75 billion in cash each month for the next nine months in the hopes that this cash will find its way out into the economy.
Banks are among the biggest holders of these Treasury notes (other than foreign countries), so they will be the beneficiaries of the majority of the new cash. The Fed’s hope is that the banks, having traded in their low-yielding Treasuries for zero yield cash, will then loan out that cash to businesses and consumers, seeking to increase their return.
The biggest challenge to this? What if the banks simply go out and buy more Treasuries?
The Fed has few tools to enforce compliance with its intent, so the success of this program is largely dependent on the willingness of banks to lend. That, unfortunately, is something that has been under significant doubt, lately.
Mortgage pricing worsened quickly yesterday on the news, as traders saw this as an opportunity to cash out their gains from recent days’ transactions. The market turned around shortly thereafter, moving mortgage rates almost back to where they had been prior to the announcement. Markets had expected a certain rate level and, after a few minutes in which they digested the news, they settled right back on it.
Yesterday, payroll firm ADP announced that its survey of private employers showed an increase of 43,000 jobs on private payrolls, indicating there is some hiring strength in the economy. This number, though, is not sufficient to even beat the rate at which population growth adds to the labor force. Today’s unemployment claims figure showed that, as 457,000 Americans filed for unemployment benefits, a big jump from last week’s results. We’ll get a deeper look at the employment situation tomorrow morning, as the Bureau of Labor Statistics will report the new unemployment rate and details on the jobs situation.
Mortgage pricing has jumped this morning, pushing down rates. It has now returned to the highest levels previously reached in September and October, however, it is unlikely to fall much farther, as low rates themselves become an impediment to further rate improvements. I would suggest locking mortgages with closings coming up within the next 30 days. Tomorrow’s non-farms payrolls number is too significant a report to risk floating into, unless closing is too far away for a reasonable lock. Any closing more than 30 days away could be floated, as that period of time will allow enough trading days for recent market volatility to return pricing to current levels.
If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
GDP Results On Target, Quantitative Easing Speculation Dominates Markets
October 29, 2010 by Dan Hartman · 2 Comments
GDP grew 2.0% in July-September quarter; Motor vehicles, computers contributed to growth; 0.6% real price growth; Mortgage pricing improving at end of a volatile week – Daily Mortgage Rate Update for October 29th, 2010
The Commerce Department reported on growth in US GDP this morning, indicating that the economy grew at a modest pace of 2.0% in the third quarter. This matched analyst expectations prior to the report, but added more fuel to the bonfire of speculation that has erupted around next week’s Federal Reserve Open Markets Committee meeting.
GDP growth was driven by substantial growth in motor vehicle sales and computers, as consumers and businesses who had deferred purchases were unable to continue that deferral. Household durable goods purchases and business investment showed substantial gains, although lower than in the 2nd quarter. Import growth slowed somewhat on the weaker dollar, while growth in exports slowed by a similar proportion. Government spending continued its increase.
Housing figures were singularly dismal, with a 29.1% decrease in spending on home purchases. As we’ve seen and said before, housing is a key drag on the economy. It led the economy into the recession, and it will have to stabilize before we can get meaningful economic growth.
Mortgage and Treasury pricing this week has been completely dominated by speculation about the results of next weeks Fed meeting. It is widely believed the Fed will initiate a set of moves designed to pump more money into the economy, falling under the title “quantitative easing”. This week’s speculation has centered around the size and timing of that program. While are some a predicting a program of $500 billion could be enacted, others have predicted a program of $1.5 trillion may be necessary to have the desired impact. This has caused significant fluctuations in mortgage pricing, however prices have recovered most of their earlier losses by this morning.
Mortgage pricing improved Thursday, and is up again this morning, sending rates down, following 6 straight days of losses. I anticipate pricing should improve Monday and Tuesday, but Wednesday of next week will be extremely volatile with election results, the ADP private payrolls report, and the Fed meeting adjourning in the early afternoon. I suggest floating until Monday or Tuesday, as there is still a little more life left in our current rally.
As I mentioned earlier, next week is an extremely busy week, with the election, the Fed meeting, and employment data all packed into 5 short days. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
US Treasury Auctions Bond with Negative Yield as Deflation Fears Ease
October 26, 2010 by Dan Hartman · 2 Comments
TIPS auction yields -0.55%; Suggests traders feel that upcoming Fed actions will cause significant inflation; Housing data abound – Daily Mortgage Rate Update for October 26th, 2010
The US Treasury auctions three main types of securities to meet the borrowing needs of the US Government. The most commonly issued security is the Treasury bill, a short-term security with a maturity of less than 12 months. The Treasury bill is differentiated from other types of securities in how it pays interest. Unlike other securities that pay interest semi-annually, the Treasury bill doesn’t pay interest, per se. Rather, investors receive their return on Treasury bills through discount pricing. For example, if a 6-month Treasury bill was yielding 2%, the investor would buy that bill for just over 99 cents on the dollar, thereby getting a 1% return at the end of 6 months.
The type of Treasury security with the most dollar volume in circulation is the Treasury note / bond. While technically two different securities, both function identically, with the only difference being the term – notes have terms up to 10 years, while bonds can be as long as 30. Notes and bonds both pay interest semi-annually. The 10-year note is often seen as a benchmark for other interest rates.
A newer type of security is the Treasury Inflation-Protected Security or TIPS. This security provides returns to investors in two ways: through interest payments, which are usually quite low; and through principal increases based on the Consumer Price Index, the CPI.
A funny thing happened at the5-year TIPS auction yesterday. Investors were so convinced that inflation will pick up in the near future as the Fed embarks on its new “quantitative easing” campaign, that they bid so much for the securities the yield was actually negative 0.55%! Based on yields on regular 5-year notes, this implies an expectation of inflation in the range of 1.7% to break even with the non-inflation-indexed securities. While this is certainly not out of control – bear in mind that the Fed’s official target is 2% – it is higher than the level of inflation currently indicated by the CPI. It appears that a number of investors share the sentiment that inflation will be higher – 2.84 times as many bids were received by Treasury for this round of TIPS as there were securities available for sale.
The results of this auction spilled over into mortgage markets, causing a significant retrenchment in mortgage pricing. In addition, there have been some minor effects to pricing lately due to the recent housing data. Yesterday, we learned that the volume of home sales was up in September over August, but that prices had decreased slightly. Today, a second index, the Case-Schiller Home Price Index confirmed that prices are declining, albeit very gradually, 0.2% in August.
Look at those two data points for a second and you will see they don’t match up – sales increase in September following a price decrease in August. Neither one of the data points is terribly surprising as we’re still in the final stages of the tax credit hangover.
One final data point this morning showed that consumer confidence improved slightly in October as concerns about employment linger.
Mortgage pricing has worsened this week so far, but I’m expecting there will be a bit of a rebound around 1:00 this afternoon when the Treasury’s auction of 2-year notes likely goes quite successfully. Still, with pricing hovering near all-time highs, it’s not a bad idea to look towards locking loans closer to closing. I would suggest locking loans within 30 days of closing this afternoon if we do get a reprice for the better as I am expecting.
Tomorrow and Thursday both have more Treasury auctions, while Friday has 3rd quarter GDP. There is certainly enough data to influence markets later this week, but it is unlikely this week’s data will be all that surprising. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
Bernanke Cites Lack of Inflation in Statement Supporting Fed Action – Daily Mortgage Rate Update for October 15th, 2010
October 15, 2010 by Dan Hartman · 2 Comments
CPI up a meager 0.1%, flat net of food, energy; Retail sales beat expectations on auto, truck sales; Empire Fed index jumps – Daily Mortgage Rate Update for October 15th, 2010
After yesterday’s Producer Price Index showed a sharp jump in the cost manufacturers are absorbing to make products, analysts were slightly disappointed with this morning’s Consumer Price Index results. Expected to show there was some degree of inflation present, instead, the CPI revealed that prices failed to climb for the 2nd straight month. Overall, prices were up 0.1%, but net of more volatile food and energy costs, prices were flat – 0.0%. This mirrors similar low inflation for August. In the long term, low inflation impacts the ability of workers to request higher wages, which could easily lead to more price stagnation, etc. It appears that the only inflation present in the economy is that caused by producers “pushing” cost increases along to consumers. The more beneficial form of inflation, “demand pull” won’t kick in again until consumers are more comfortable spending, and that’s unlikely to happen until the employment situation improves.
Inflation, or, more specifically, CPI, also affects recipients of Social Security payments, who learned this week that they will not receive a cost of living adjustment for the 2nd year in a row.
Retail sales did show a glimmer of hope in September, increasing by 0.6% from August’s figures, as strong gains in auto sales led results higher. Other sectors showing gains were home furnishings, electronics, appliances, and hardware. Clothing and general merchandise, meanwhile, showed flat sales or declines. Reading beyond these numbers, I believe we’re seeing a bit of pent-up demand that had been growing as consumers deferred major purchases. We’re approaching a point where many consumers are no longer able to get by on the goods they have. Appliances wear out, older cars become increasingly expensive to repair. While many have deferred these expenditures in the past, they may be unable to do so going forward, which could spark some much-needed economic growth.
The big data point this morning was the Federal Reserve Bank of New York’s Empire State Manufacturing Survey, also know as the Empire Fed index. This index measures sentiments and activity at manufacturing companies in the state of New York, and today it jumped significantly. Its rise could signal growth in manufacturing and related employment, which would be a significant positive for the economy. A bit later, though, we received word that consumers are not feeling as confident. The University of Michigan’s consumer sentiment survey showed consumers opinions weakened in October on unattractive job prospects.
Federal Reserve Chairman Ben Bernanke spoke this morning on the economy, and answered questions about the Fed’s plans to further stimulate economic activity, the so-called QEII that has been much discussed of late. Under this 2nd quantitative easing program (the first was the Fed’s purchase of almost $2 trillion in mortgage-backed securities), the Fed is expected to buy billions in Treasury debt to pump much-needed cash into the economy. Bernanke’s remarks this morning left analysts all but certain the Fed would act at is next meeting in early November.
Mortgage pricing opened worse this morning, but has stabilized since then and is just above yesterday’s close. Pricing had trailed off late yesterday on weak results in the 30-year Treasury bond auction. Mortgage rates are still very near all-time lows, with the latest Freddie Mac survey showing an average 4.19% 30-year fixed rate with 0.8 points. This means that there is a greater risk of rates worsening in the short term than there is opportunity for them to improve. I recommend that mortgage advisors and borrowers consider locking any loans closing within the next 30 days. Longer-term closings still have enough time to wait for the next wave of low rates should markets worsen.
Next week will not be as data-intensive as this week has been, but much of the data will be housing related, which could impact mortgage pricing. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Weekly Recap for September 20th-24th
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
Mortgage Rates Rise from All-Time Lows on Profits, Fed Plan – Daily Mortgage Rate Update for October 13th, 2010
October 13, 2010 by Dan Hartman · 1 Comment
JP Morgan Chase reports jump in profits; Fed minutes leave little doubt it will intervene in November – Daily Mortgage Rate Update for October 13th, 2010
Stocks have opened stronger, and bonds weaker, this morning on news of higher-than expected profits from JP Morgan Chase, one of the largest money center banks in the United States. The bank reported its stronger results were caused by lower reserves set aside to cover mortgage and credit card losses as it starts to see fewer defaults in those areas. It is likely we may see similar results as other large banks report their earnings later this fall. September 30th marked the end of the 3rd quarter, so all major corporations will be reporting their profits or losses in the coming weeks.
Yesterday’s release of September’s Federal Reserve Open Markets Committee minutes surprised few in its indication that the Fed is almost certain to enact a plan of asset purchases should economic data remain week between now and its November meeting. Its action would be intended to push more money into markets by buying Treasury securities, most likely 2- to 10-year notes.
On Wall Street, a common phrase is, “buy the rumor, sell the news”. Well, the going rumor for the last two weeks has been another round of Fed intervention in asset markets. And they have bought, bringing Treasury yields down by more than 20 bps. In my opinion, yesterday’s release of the minutes was the ‘news’ in this situation. It is likely over the next 2-3 weeks we will see a minor retreat in mortgage and treasury pricing as traders seek to lock in recent gains.
Mortgage pricing is off its peak last Friday on the employment situation report, but is still within striking distance of all-time bests. It is increasingly likely we’ll see a moderate worsening in pricing over the next 2-3 weeks as traders evaluate their positions, however, the probable enactment of the Fed’s plan in November should restore pricing closer to its recent high levels. I recommend that anyone within 30 days of closing seriously consider locking their loans. Loans more than 30 days away may see a short-term worsening, but have enough time before closing to allow for the market to move back in the right direction.
Tomorrow morning brings what I believe to be the most rate-influential economic report of the week, weekly unemployment claims. If that figure is substantially lower than 450,000, pricing could worsen. Unfortunately for the economy, it is unlikely it will be. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Weekly Recap for September 20th-24th
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
95,000 Jobs Lost on Government Cuts, Private Employers Add 64,000 – Daily Mortgage Rate Update for October 8th, 2010
October 8, 2010 by Dan Hartman · 1 Comment
Economists’ estimates disappointed; Unemployment rate steady at 9.6%; August, July revised worse; Record low 4.27% 30-year fixed may hold – Daily Mortgage Rate Update for October 8th, 2010
The Bureau of Labor Statistics reported this morning that the US Economy shed 95,000 jobs in September. This result missed average economist estimates for a loss of only 5,000 jobs, and was largely driven by a substantial increase in government layoffs. In addition to 77,000 temporary Census workers whose positions ended, 76,000 positions were cut by state and local governments struggling to balance budgets in the aftermath of the economic crisis. These cuts far outweighed the 64,000 jobs added by private employers in September.
The unemployment rate held firm at 9.6% in September. Although the population eligible to participate in labor markets increased by over 200,000, nearly 100,000 long-term unemployed gave up looking or found work, contributing t0 a total of 175,000 who joined the ranks of non-participants. The unemployment rate is a somewhat flawed measure, as it looks only at non-workers who actively sought employment. Still more workers have given up looking altogether, and yet others are working part time because they have been unable to find full time work. Some estimates suggest that as many as 20% of Americans may not have the level of employment they desire.
Jobs figures for the months of July and August were also revised lower, adding an additional 15,000 jobs lost.
Mortgage rates hit a new record low last week at 4.27% for the 30-year fixed according to mortgage consolidator Freddie Mac, as speculation about a new round of indirect economic stimulus, or quantitative easing, from the Federal Reserve circulated through Wall St. In addition to closing costs, those getting the lowest rate are paying 0.8 points in origination fees, a rise from the recent level of 0.7%. This reflects the increasing belief from many homeowners who believe they may never see lower interest rates, and who wish to buy into the lowest possible rate. Meanwhile, several recent surveys have shown increases in closing costs for all mortgages. It appears these increases are related to improved disclosure of costs related to regulatory changes enacted on January 1st, 2010. Some part of this cost has also been attributed to the increasing costs of mortgage compliance and licensing, causing many mortgage originators to increase their prices.
Mortgage pricing has opened sharply stronger this morning on the weak employment report. At present, the 3.5% 30-year Fannie Mae MBS is at the highest pricing level ever seen, enhancing opportunities to take advantage of low rates. Still, because pricing is so favorable right now, it will only take a little bit of good news to cause substantial losses. It is likely that as much as 1 point in pricing, or 0.25% in interest rate, is at risk right now, and could be lost on relatively minor good news for the economy. I recommend that borrowers and originators consider locking any loan closing within 30 days. Loans beyond 30 days from closing could benefit from floating until they get closer to their closing date.
If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Weekly Recap for September 20th-24th
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
Jobless Claims Down, Retail Sales Up, so Why Are Rates Improving? – Daily Mortgage Rate Update for October 7th, 2010
October 7, 2010 by Dan Hartman · 1 Comment
New claims slide to 445,000; Retailers pleased with late surge in back-to-school shopping; There may never be a better day to lock a loan than today – Daily Mortgage Rate Update for October 7th, 2010
The Labor Department reported this morning that 11,000 fewer workers applied for first time unemployment benefits than last week. Only 445,000 applied, the first time that figure has fallen below 450,000 since July. Still, the picture wasn’t entirely rosy, as 3000 claims were added to last week’s previously released 453,000 bringing that number to 456,000. The 4-week moving average decreased slightly to 455,750. Still, the current level of claims is substantially above the 400,000 level believed to be consistent with the level of hiring needed to start shrinking the unemployment rate.
Meanwhile, Thompson Reuters reported that same-store sales increased by 2.8% in September. This bested analyst estimates of a 2.1% increase in sales, and should have put some pressure on mortgage pricing, as it does reflect a stronger economic situation.
For some reason, it hasn’t. There are a few suspect causes in this. First, PepsiCo opened the 3rd quarter earnings season this morning, announcing earnings that were in line with analyst estimates. Unfortunately for markets, Pepsi also lowered its estimates for future results, mirroring other data suggestive of a decrease in US GDP growth. Second, the Bank of England announced its plan to maintain current levels of stimulus, further pressuring the value of the US dollar. The biggest issue, though is traders anticipation of tomorrow’s employment situation report. Expected at 8:30 in the morning, the report will address changes in the US workforce in September, and is widely viewed as the best gauge of economic activity available outside the GDP report due later this month.
Mortgage pricing has opened stronger after making some huge gains yesterday on the weak ADP private payrolls report. Pricing currently reflects markets that are almost certain the Fed will take action as soon as later this month to ease growth, and it also reflects dire expectations about tomorrow’s jobs report. Since pricing started its slide this summer, we have not seen a day with a more favorable morning lock situation. I’m going a little out on a limb, but I believe that we will never again see a better day to lock a rate than today. While there will be opportunities to lock close to today’s pricing, and while getting to a shorter lock period will bring gains, I feel locking today is a very good idea.
I’m off to start holding my breath for tomorrow’s report to come out. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
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Weekly Recap for September 20th-24th
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
