Archive for Weekly Update on Interest Rates
What’s Ahead For Mortgage Rates This Week : February 1, 2010
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In a news-heavy week, mortgage markets improved last week, adding to a 3-week rally.
But, given last week’s data and domestic story lines, it’s surprising that rates actually fell.
- The Federal Reserve said the economy continues to strengthen
- Consumer Confidence pushed to a 2-year high
- 4th Quarter domestic output exceeded Wall Street’s expectations
Usually, events like these draw money away from the bond markets and into the stock markets and Wall Street preps for better corporate earnings. The movement pressures mortgage rates to rise.
Last week, however, different stories trumped the headlines including a report from Standard & Poor’s that said U.K. banks are no longer counted among the world’s most stable. This research, in particular, triggered a flight-to-quality among investors that pumped the U.S. dollar and sparked new demand for mortgage bonds.
It’s one reason why we ended the week on a rally and it just goes to show how unpredictable mortgage rates can be.
This week figures to be a challenge, too.
First, we start the week with key inflation data. When inflation runs hot, it’s usually bad for mortgage rates. Inflation is expected to be tame, however — a point the Fed made several times in its press release last week. That said, inflation data is closely watched by markets and can make a big impact on rates.
Then, on Wednesday, ADP releases its private sector job report. The ADP data is a precursor to the government’s own Non-Farm Payrolls report which is due to hit Friday. ADP is expected to show a net loss of roughly 85,000 jobs. Depending on where the actual numbers comes in, mortgage rates could wiggle a bit.
If the ADP report shows much fewer than 85,000 jobs lost, expect mortgage rates to rise. The same is true for Friday’s job report. A miss on expectations will cause mortgage to ratchet higher.
Since peaking on the last day of December, mortgage rates took a slow, steady descent through January. They’ve have taken back close to two-thirds of December’s overall losses. This week, rates could fall some more, or they could bounce back up. The most prudent time to lock would be prior to Tuesday’s closing.
After that, the respective jobs reports will take over and rates could go either way with force.
What’s Ahead For Mortgage Rates This Week : January 25, 2010
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Conforming and FHA mortgage rates improved last week on the combination of weaker-than-expected economic data and new anti-banking rhetoric from the White House.
The S&P 500 shed nearly 4 percent in its worst weekly showing since October 2009 as all 10 sectors fell. As the money left stock markets, it made its way to bonds — including the mortgage-backed variety.
As a result, California mortgage rates fell for the third straight week.
Since shedding 300 basis points in December, mortgage bond pricing has recovered a bit more than half of those losses. It’s helping with home affordability and opening new refinance opportunities in Mountain View and around the country.
This week, though, mortgage rates could rise back up. There’s a lot going on.
First, on Monday, the December Existing Homes Sales report will be released. The report is expected to be extremely weak as compared to November. This is because of a combination of factors including:
- The initial tax credit expiration date of November 30, 2009
- Sharply rising mortgage rates throughout the month of December
- A general slowdown from the holidays and from the weather
Therefore, don’t be surprised by the newspaper headlines you see Tuesday morning.
Other data this week includes the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same. New Home Sales should be similarly strong.
But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010.
The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely. The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.
What the Fed says about the economy will be much more important that what it specifically does about the economy for now. If the Fed says the economy is growing as expected, look for mortgage rates to rise. Conversely, if the Fed says the economy is at risk, expect mortgage rates to fall.
The safest rate lock strategy this week is to lock your mortgage rate before the Fed’s 2:15 PM ET adjournment Wednesday. Rates will be bouncy all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.
What’s Ahead For Mortgage Rates This Week : January 19, 2010
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Mortgage markets showed little conviction last week, carving out just a narrow trading channel. There was very little data on which for markets to move, leaving mortgage rates momentum-bound.
Luckily for rate shoppers, mortgage rate momentum was favorable. Rates were slightly lower Monday through Thursday before breaking downward Friday afternoon. Home shoppers in Midtown Palo Alto this past weekend caught a nice break.
Last week marked the second straight week in which mortgage rates fell.
This week, in holiday-shortened trading and with little economic data set for release, expect mortgage rates to again move on momentum. The biggest report of the week is Wednesday’s Producer Price Index.
Producer Price Index is important to mortgage rates because of its role in inflation. PPI is akin to a Cost of Living-type measurement, but for business. As business costs rise, the thought goes, it’s not long before consumer costs rise, too. Businesses eventually pass on costs, after all.
In this manner, a rising Producer Price Index can foreshadow rising consumer prices, and, therefore, inflation.
Inflation is awful for mortgage rates.
PPI expectations have revised downward this month, especially because last week’s data showed a deceleration in consumer prices nationwide. If PPI isn’t as weak as expected, mortgage rates will rise.
Other influential data this week includes Housing Starts, Consumer Confidence and Initial Jobless Claims.
So far, 2010 has been for mortgage rates in California and around the country. If you’re in need of a rate lock, this week may be a good time to take one.
What’s Ahead For Mortgage Rates This Week : January 11, 2010
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Data was sparse through 2010’s first trading week last week, setting the stage for a week of momentum trading.
In up-and-down trading, mortgage pricing improved overall but the best rates of the week didn’t last long.
Rates improved Monday and Tuesday as an oversold market corrected itself to better price points. Then, in anticipation of the December jobs report, rates worsened Wednesday and Thursday. Friday, after the jobs report was released, pricing proceeded to carve out a huge range before settling unchanged.
On average, lenders issued new rate sheets every few hours last week. It was a difficult week to shop for mortgages in California and elsewhere.
Unfortunately, this week doesn’t figure to be much better.
For the second straight week, the economic calendar is bare. Traders — like last week — will be forced to rely on “gut feel” to make their trades. That rarely bodes well for shoppers. Especially because traders are facing a mortgage market in the midst of a terrible losing streak.
Since reaching an all-time low December 1, 2009, 30-year fixed rate mortgages have worsened by 300 basis points, or 3 percent.
To a homeowner or rate shopper in Palo Alto , the math of 300 basis points looks like this:
- 5 weeks ago, a 4.625 percent mortgage rate required 0 points
- Today, the same 4.625 percent mortgage rate requires 3 points
1 point is equal to 1 percent of your loan size.
Last month’s worsening is the worst 1-month deterioration in consumer mortgage rates from all of 2009.
If you’re hoping for rates to fall back to early-December levels, know that it is possible. For this week, here’s some things that could push rates in the right direction:
- 3 Fed members are speaking. Each mention of economic under-performance in 2010 will be good for rates.
- Retail Sales data is released Thursday. If the numbers are weak, mortgage rates should improve.
- Consumer confidence surveys are released Friday. Lower confidence levels should help rates fall.
Be ready to lock at a moment’s notice this week. Rates may rise or fall, but markets are positioned toward the former.That’s where momentum is pointing as of the Market Open today.
Keep an eye on rates and your loan officer on speed dial. Once the mortgage market starts breaking, it’s expected to break quickly.
What’s Ahead For Mortgage Rates This Week : January 4, 2010
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Mortgage markets were relatively flat last week during holiday-shortened trading. After starting the week with a Monday surge higher, mortgage rates settled down through Tuesday and remained somewhat flat into the early-close for New Year’s Eve.
However, as compared to the 4-month low posted post-Thanksgiving, conforming mortgage pricing has now worsened by more than 300 basis points. In English, that means that a December 1 mortgage rate quoted with zero points is available today at a cost of 3 points.
1 “point” is equal to 1 percent of how much you borrow.
If you were shopping for homes or rates last month, you no doubt noticed that pricing zoomed higher to close out 2009. How 2010 starts is anyone’s guess. This week will hold the answer.
It’s a week light with data, but heavy on importance. The biggest news comes Friday in the form of the December employment report.
Last month, the Unemployment Rate fell for just the second time in 2 years and net job gains nearly turned positive. Both points were bad for mortgage rates because a weak economy has helped keep rates down. Evidence of improvement, therefore — at least according to Wall Street — is reason for reversal.
This month, analysts expect a net job gain of zero. If they get it, the psychological effect of the data should cause stock markets to rise and mortgage markets to sink.
A worsening market is bad for rates.
Other data to watch this week is Tuesday’s Pending Home Sales report and Wednesday’s FOMC November Minutes release. Both can forcefully impact markets and rates.
Today is January 4 — there’s a lot of 2010 to go. However, that won’t stop Wall Street from trying to figure it out. As the stock market rises and falls this week, the bond market will likely be in tow. Abrupt movements mean changing mortgage rates and we’ll see more of our fair share of it over the next few weeks.
If you’re quoted a mortgage rate this week that fits your budget, consider locking it in. Rates may fall in 2010, or they may not. It’s a gamble on which you don’t want on the wrong side because when rates do rise, they’re likely to rise quickly.
Markets can’t sustain rates like this in an expanding economy.