Mortgage Rates May Fall Even Lower

How low can mortgage rates go?

It seems like mortgage interest rates keep falling to new lows, largely thanks to a struggling economy.

The 30-year fixed-rate mortgage fell to 3.56 percent with an average point of 0.7 for the week ending July 12, down from 3.62 percent the previous week, according to Freddie Mac. At the same time, the 15-year fixed-rate mortgage dropped to 2.86 percent with an average 0.7 point, down from 2.89 percent from the previous week. This time last year, the 30-year fixed-rate mortgage averaged 4.51 percent, and the 15-year was at 3.65 percent.

A poor jobs report for June helped decrease long-term Treasury bond yields and mortgage rates. Only 80,000 jobs were created, not enough to make a dent in the 8.2 percent unemployment rate.

Homebuyers and current homeowners, as well as mortgage professionals, are probably wondering if rates can drop even more. Homeowners may be wondering if they should put off their mortgage refinance in a bid to lock into an even lower interest rate.

Wait for Lower Rates?

Home buyers might be thinking about delaying a home purchase for another year a few more months to wait for a better rate. Perhaps they think home prices will go down even more, and they figure they’ll be able to buy a larger, better house if interest rates decline a bit more.

Here are some reasons why mortgage rates could drop even more.

Bond spreads. Mortgage rates are higher than usual when compared to Treasury bonds.

Mortgage rates, typically based on Treasury bond yields, are usually about a 1.7 percentage point higher than the 10-yield Treasury bond yield. But recently the difference between mortgage rates and those bond yields, or the spread, been has more than 2 percentage points higher.

The euro zone. The ongoing euro zone debacle, which shows no signs of ending, could prompt investors to put even more of their money into Treasuries. That would drive both Treasury yields and mortgage rates even lower. European leaders appear to be dedicated to austerity measures that have proven to be a failure.

Drastically slashing public spending and raising taxes in an effort to decrease countries’ debt have decreased government revenues and worsened recessions. Recession in Europe will probably be a drag on the U.S. economy, as Europeans will have less money to buy American goods.

Plus, financial markets will probably continue to fear that break up of the euro zone will create a financial crisis that spreads to this country. Many European banks are highly interconnected with the U.S. financial system, and our fragile economy remains vulnerable in this integrated financial landscape.

Quantitative easing. The Federal Reserve might pursue another round of quantitative easing, a so-called QE 3, in which it purchases large amounts of bonds in an effort to drive down interest rates. Although only a few Fed board members now advocate more easing, other members say they will support it if economic conditions worsen.

The Fed has already extended its Operation Twist – selling short-term bonds and buying long-term bonds in an effort to drive down long-term interest rates – through the end of the year.

China. A slowing Chinese economy could export more economic troubles. The signs of an approaching economic meltdown are clear, notes an article in the journal, Foreign Policy. Chinese businesses are obtaining fewer loans. Interest rates have been cut. Manufacturing output has tanked. Imports are flat, and GDP growth projections are down. Real-world signs, like fire sales of government property, falling pork prices, and wealthy Chinese moving their money overseas, and incidents of social unrest, are evidence of a faltering economy.

Consumers Benefiting from Low Interest Rates

While low home loan rates show the feebleness of the global economic recovery, homeowners benefit by being able to refinance at much lower rates. If home loan rates are not at record lows, they’ll probably stay pretty close. The average 30-year fixed has stayed below 4 percent for 16 weeks, while the average 15-year fixed has remained under 3 percent for seven weeks, according to Freddie Mac.

But then again, anything is possible. It’s possible that the world economy will unexpectedly rebound and euro zone leaders will suddenly agree on a comprehensive solution to their fiscal crisis. Instead of waiting for mortgage rates to drop even more, home buyers and homeowners should lock into a low mortgage rate when it’s in their best financial interest.

 

Home Prices and Affordability – the Truth

Gaining a little perspective on what really drove home prices over the last few decades can be valuable to would be buyers. The state of the market now that values have come well off their peak in concert with record low interest rates should be hard to resist. Still persistant though is the uncertainty breeding fear in many and paralyzing what would be an otherwise typical reaction to more purchasing power. Keen observers know that the best opportunities are never obvious and that the truth is only uncovered by digging in. To that end, this video may help peel back a few layers of tarnish and provide a better view of where we’ve been, how we got there and where we are now.

Purchasing Power vs. Home Prices

Muted Inflation Helps Mortgage Rates Move Sideways

Both CPI and PPI show core inflation negligible, but food, energy prices continue climb; European sovereign debt crisis gets some relief; Economic data turns slightly mixed; Boston Fed President suggests economic growth could be greater than expected, but housing will continue to drag

After opening the year with mixed news about employment, the second week of January brought even more insight into the health of the nascent economic recovery. For several months, traders have worried about the potential rise in inflation that could be caused by the Federal Reserve’s Quantitative Easing program. This week, we got statistical data showing the status of that effect, and comments from a Fed official regarding those concerns and economic expectations for 2011.

On Monday, there was no economic news to affect mortgage rates, but there was still a slight improvement in pricing for technical reasons. What do I mean by that? Sometimes market shifts cause significant, rapid changes in security pricing. That was evidently apparent in Mortgage-Backed Security pricing in November and December 2010, as rates deteriorated quickly following the announcement. There has been some discussion that the pricing shift moved too far and too fast. In a situation such as that, it isn’t uncommon to see a moderate reversal in which prices shift in the other direction, especially in the absence of relevant data. These changes are often described as technical in nature, referring to their occurrence based solely on previous trading information.

Tuesday was another quiet day from a data perspective. While reports indicated a slight worsening in business sentiment and a decline in wholesale inventories, little was made of these reports. The bigger issue was an announcement from the central bank of Japan that it would buy bonds in Europe’s struggling economies in support of the movement to stabilize those countries. China had made a similar announcement in prior weeks. This comes after a time in which concerns about the health of several of Europe’s economies caused investors to pile into US Treasury securities because they offered better security. The result was that Treasury rates climbed as positions were unwound.

Wednesday was significantly quieter. While there was some news about prices of exports and imports, there were no meaningful surprises. Thursday, meanwhile, brought significant data in the form of the Producer Price Index. The PPI is generally the first indication of the pace of inflation we receive monthly, and typically mirrors changes in the more widely watched Consumer Price Index. December’s PPI reading showed accelerating overall inflation, with overall prices rising 1.1% on the month. Core inflation, though, totaled only 0.2% after more volatile food and energy costs were stripped out. While overall inflation was quite high, much of this was attributed to changes in petroleum prices, which have been precipitated by declines in the value of the dollar.

Friday’s CPI report affirmed what appeared in the PPI report Thursday: prices are moving, but only slightly, and much of the shift is driven by energy price increases. The CPI showed overall inflation at 0.5%, with core inflation a meager 0.1%. The bottom line many read into this is that energy prices are rising, but there is no spillover of that rise into other products at this time. According to a presentation by Boston Federal Reserve Bank President Eric Rosengren, the key questions that will determine the pace of ongoing economic recovery are: 1) what role will housing play in the recovery, and 2) will inflation grow too swiftly?

Rosengren presented at the New England Mortgage Expo on Friday, a presentation I was able to attend. While Rosengren suggested that he was more confident in the economy than most other forecasters, predicting 3.5% to 4.0% growth in the coming year, he pointed out that housing continues to drag on the economy, affecting employment through low construction of new homes, and affecting GDP through reductions in the purchases of home-related products new homeowners often make. In discussing the broader concerns about inflation, he said that inflation could occur if banks more readily lent out the extra reserves they are acquiring through the Fed’s bond purchase program, but they are not, and that is keeping inflation in check. Ultimately, though, it appears his optimism about the pace of economic growth did have an effect on Treasury rates, as rates rose later in the day.

This week brings more economic data to the forefront, with market-moving news Tuesday, Wednesday and Thursday. Here’s a recap:

Monday:

  • Markets closed for Martin Luther King holiday

Tuesday:

  • Empire Fed Index

Wednesday:

  • Housing Starts

Thursday:

  • Jobless claims
  • Existing home sales
  • Philadelphia Fed survey
  • Leading indicators

Friday:

  • No meaningful data

Data are clearly clustered to the middle of the week, with Thursday the most significant day. Much attention will be paid to the to Fed announcements for news of the strength of the manufacturing sector. All of this, though is a preview to next week’s preliminary reading on the 4th quarter GDP, which should be quite influential. Based on the type and volume of data, though, I suspect that any shifts in mortgage pricing will be muted, and should not be enough for mortgages to break out of their current range. 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 week!

Related articles:

Last Week’s Report

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.

Employment Data Roil Mortgage Rate Markets

Employment Situation Report sends mixed messages; ADP suggested strong hiring; Unemployment claims continue downward trend; Bernanke speaks to Congress

The first week of any month is typically a very active week, from an economic data perspective, and January 3rd to January 7th 2010 was no exception. Mortgage pricing continued its recent volatility last week, as conflicting employment data exerted their forces on Mortgage-Backed Security prices. Let’s review what happened. Monday and Tuesday were relatively quiet days, as traders waited for news that might help guide them on the nation’s employment situation.

Why is employment data so important?

The Federal Reserve holds a dual mandate from the US Government. That is to say, the Government has given the Fed relative autonomy, but it has also given two key goals:

  1. Keep inflation contained
  2. Seek the highest level of employment possible

This mandate means that new employment data will have a significant effect on the Fed’s ability and willingness to raise or lower interest rates. As we have seen over recent months, inflation is under control, so much so that the Fed has initiated a program of Quantitative Easing to push more cash into the economy in efforts to raise the inflation rate. Employment, on the other hand, has been a difficult challenge.  Hence, traders focus very closely on employment data when it becomes available.

Last Wednesday brought the first data on employment, and it was quite a surprise. Payroll firm ADP reported that private employers had added 297,000 jobs in December, far above the approximately 100,000 jobs the report had been expected to show. The effect on mortgage rates was immediate, as pricing on MBS dropped, pushing rates on most mortgage higher by 0.125% to 0.25%. Throughout the day on Wednesday, pricing worsened, closing almost 1 point worse than it had on Tuesday.

The 297,o00 result had bigger effects than on immediate pricing on Wednesday. It also caused economists to reconsider some of their estimates that had been made regarding Friday’s Employment Situation Report from the Commerce Department’s Bureau of Labor Statistics. While the report had previously been expected to show between 140,000-150,000 jobs added, the higher ADP result forced analysts to reconsider, and many did, revising their estimates higher for Friday’s report, mostly into the 175,000-180,000 range. We’ll see in a moment how accurate they were.

Thursday was a quieter day, as anticipation of Friday’s report firmly took hold. The only meaningful data was the week’s unemployment claims report which showed a slight rise in claims, but affirmed that the trend in weekly claims continues to decrease. Since mid-2010, average weekly claims has gradually declined from nearly 500,000 to close to 400,000, a strong sign that the worst of the employment crisis may be behind us.

Friday morning brought the Employment Situation Report, and it brought quite a shock to financial markets. According to the BLS report, the economy added a scant 103,000 jobs, a far cry from the average 175,000 estimate, and well below the possibility of as many as 300,000 jobs that had been suggested by Wednesday’s ADP report. The report was buoyed somewhat by increases in October and November reports that added 70,000 jobs in those months. Still, for the economy to add only 103,000 jobs in December shows that the Federal Reserve still has work to do to achieve its goals.

To close out the week, Fed Chairman Ben Bernanke spoke to Congress, defending the Fed’s Quantitative Easing program. His work was certainly made easier by the employment data; the economy needs to add between 150,000-170,000 jobs per month just to keep up with new workers entering the labor force. He spoke quite specifically on concerns about a looming crisis in municipal securities issued by state and local governments, saying that a bailout for struggling municipalities was essentially out of the question.

This week will be much quieter in regards to economic data, and could be a nice respite for those overwhelmed with last week’s data glut. The big points will give an update on inflation, which could prove to be a foil to the Fed’s plans to make hiring easier. Here’s a breakdown of what to expect:

Monday:

  • no significant data

Tuesday:

  • 3-year Treasury note auction

Wednesday:

  • Import and Export Prices
  • 10-year Treasury note auction

Thursday

  • Weekly unemployment claims
  • Producer Price Index
  • 30-year Treasury bond auction

Friday

  • Consumer Price Index
  • Retail Sales
  • Industrial Production
  • Consumer Sentiment
  • Business inventories

In general, expect the greatest focus to be placed on the measures of inflation. Meanwhile, the Treasury auctions will serve as a barometer of markets’ satisfaction with current rates. We will also get a good look at consumer activity, which drives 70% of the US economy. If consumers are happy, we can expect followers of the economy to share their sentiment. Overall, I don’t expect a significant shift in rates until month-end’s 4th quarter GDP report, but I’ve been surprised before. 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 week!

Related articles:

Last Week’s Report

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.

Where Will Mortgage Rates Go in 2011?

Last week’s Treasury auctions’ effects heavily amplified; High volatility still common in fixed-income markets; Traders coming back this week; Strong beliefs that economic growth in 2011 will be significant; What about housing?

The final week of 2011 was quite the roller coaster for mortgage originators and home buyers waiting to lock in their mortgage rate. After a very weak 5-year Treasury note auction on Tuesday, mortgage pricing worsened by almost 1 point, roughly the equivalent of a 0.25% increase in interest rates. Then, on Wednesday, 7-year notes were on the block. Surprisingly, that auction saw the healthiest bidding in many auctions. Mortgage pricing reversed, more than offsetting Tuesday’s losses. Activity was minimal on Thursday, in spite of the best weekly unemployment claims report since 2008, while Friday, mortgage pricing improved on minimal activity, as traders closed out positions to close the year.

The key characteristic seen recently in fixed-income markets, such as those for Treasury debt and mortgage-backed securities is volatility. Movement in markets since the November 3rd announcement of “Quantitative Easing II” has been exaggerated, with daily pricing changes often more than twice the previously common change. That is to say, if mortgage originators had become accustomed to mortgage prices changing by 1/4 to 1/2 point on a busy day, since November 3rd, the new reality is that it isn’t uncommon for mortgage prices to change by 1/2 to 1 point. That type of change results in very rapid shifts in mortgage rates, and volatility like that makes home buyers nervous.

A significant factor that has contributed to this volatility is low trading volume. Traders are tending to purchase fewer Treasury secruities, which is contributing to the exaggerated swings we have seen in markets. This is not at all uncommon in the holiday season. From the Monday before Thanksgiving through New Year’s Day, many bond traders schedule time off from work, as do professionals in many other industries. The result of this is that the remaining traders are more likely to be swayed when markets make a sudden move in one direction or another. Short sellers, betting that mortgage prices will continue to worsen, also contributed to this effect.

On Wall Street, the consensus is that 2011 will be a strong year for the economy. Recent economic data (other than employment and housing data) has borne this out, with most of the regional Federal Reserve Bank business indexes showing positive signs for growth, inflation starting to pull away from zero, and retail sales figures suggesting the just-ended holiday season was the best in 4 or 5 years. The Federal Reserve, on the other hand, isn’t so sure, and is continuing its $600 billion asset-purchase program, intended to provide some stimulus to the economy, but, more importantly, to keep inflation positive.

A too-low inflation rate can lead to economic stagnation much like what Japan experienced in the latter part of the 20th century. The bigger concern is that the economy might actually slip into deflation, in which prices of goods and services decline over time. This causes consumers to defer purchases, expecting lower prices, which leads to lower economic growth and still-lower prices. It can be a very difficult economic cycle to break.

If recent data is correct (and we’ll have a very good idea on January 28th when the advance reading on 4th quarter GDP is released), we should expect mortgage rates to continue rising gradually, with the 30-year fixed rate mortgage staying between 5%-6% for most of 2011, barring other significant economic shifts. If, however, the Fed is correct, and economic growth has been overestimated, mortgage rates could correct significantly later this month, likely bringing the average 30-year fixed rate back below 4.5%. At present, according to Freddie Mac, the average 30-year fixed rate is 4.86% with an average of 0.8 points.

This week will provide a significant test for mortgage rates, as the most significant data of any month is published: employment market data. November was a conundrum, as only 39,000 jobs were added, in spite of continual declines in weekly unemployment claims. When we get a reading on December, it is hoped the picture becomes much clearer. Here’s what to expect later this week:

Monday:

  • ISM Manufacturing index
  • Construction spending

Tuesday:

  • Factory orders
  • Same-store sales
  • Fed minutes

Wednesday:

  • ADP employment – private payrolls
  • ISM Non-manufacturing

Thursday:

  • Weekly unemployment claims
  • Monster employment index

Friday:

  • EMPLOYMENT SITUATION REPORT
  • Ben Bernanke speaks

All the key data points this week hit Americans in their pay checks. Are those checks growing? We’ll know by Friday. If they are, then predictions of a better-than-expected 2011 may come true.

But what about housing? Housing led the US economy into the Great Recession, as home prices tumbled when many owners were unable to make their payments, whether initially due to predatory lending, poor underwriting, or poor consumer choices, or later as the initial effects of the crisis sparked wave after wave of layoffs. Housing data has been dismal since the expiration of the home buyer tax credit last June. Because so many middle-class Americans held such a large proportion of their wealth in their homes, this has precipitated the largest broadening in the wealth gap in decades.

Consumer confidence will not rebound strongly until consumers are confident of when home prices will stop falling. At present, there are between 9-11 months of housing inventory on the market, and housing experts suggest there are many more months worth of inventory that have yet to be placed on the market. Will 2011 be the year that housing markets hit bottom? Check back here regularly to find 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 week!

Related articles:

Last Week’s Report

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 Continue to Rise; Fed Announcement Due Tomorrow

Bernanke’s comments, tax plans and Europe dominated last week; Fed meeting, inflation, manufacturing readings on the way

Last week, the markets for mortgage-backed securities were absolutely dominated by irregular economic events. Monday morning, mortgage rates looked like they might start to stabilize, as Federal Reserve Chairman Ben Bernanke’s interview on 60 Minutes assured traders that neither inflation nor long-term rates would be allowed to rise too rapidly. By the end of the day, though, sufficient doubts had arisen to bring that position into question.

Tuesday, that rally was officially over. The administration announced a tentative agreement with Republicans in Congress to extend the tax cuts currently due to expire December 31st. While still subject to substantial debate, the main effect of this announcement on markets for fixed-income securities like mortgages and Treasuries was in the huge increase in borrowing the US Treasury would need to do in order to fund the cuts. Markets had expected something to happen, perhaps at a cost between $400-500 billion, but the overall package weighed in at $700-800 billion, dwarfing prior expectations. In addition, much of the new borrowing would fund a cut to Social Security, or payroll tax withholding, which would effectively serve as a new stimulus package to the US economy.

Both the extra borrowing and the effective stimulus put extreme pressure on mortgage rates, and we saw the biggest one-day worsening in mortgage rates in many years on Tuesday. This continued affecting mortgage rates through the week’s end, as better-than-expected unemployment claims and a decrease in the trade deficit both contributed to opinions that the economy may be improving.

To be clear, it is unlikely much of anything would have happened in mortgage pricing, if it hadn’t been for the effects of the extraordinary events of Sunday and Tuesday. The other news for the week was of nominal value. This week, though, we will see substantially more interesting events, starting tomorrow with the announcement of the November PPI and the meeting of the Federal Reserve Open Markets Committee. Here’s the full calendar:

Monday:

  • No significant events

Tuesday:

  • Producer Price Index
  • Retail Sales
  • Fed Meeting Announcement

Wednesday:

  • Consumer Price Index
  • Empire Manufacturing Survey
  • Industrial Production

Thursday:

  • Jobless Claims
  • Philadelphia Fed Survey

Friday:

  • Quadruple witching hour (options expiration)

Clearly, the volume of rate sheet influential economic data this week is far beyond that seen last week. Rates could go either way this week; if the Fed offers some clarity on its policies, the inflation measure show muted price increases, and manufacturing data is on target, mortgage rates could actually improve. If any of these things doesn’t happen, mortgage rates will probably continue to worsen.

Average 30-year fixed rates have already risen about 1/2% from recent lows.  A recent blog post does an excellent job of explaining the effect of this on mortgage qualifications. Bottom line: higher rates are bad for the already beleaguered housing sector. We’ll find out soon whether rates will continue to rise, or if they’ll put the brakes on. 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 week!

Related articles:

Last Week’s Report

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 Continue Rising on Mixed Employment News

ADP report shows strong job gains; Unemployment claims rise; Big miss in non-farms payrolls; Bernanke speaks to 60 Minutes defending Quantitative Easing

After 3 straight weeks of weakness in the market for Mortgage-Backed Securities, traders were looking for solid economic news to guide them. They got news, but it didn’t all point in the same direction.

Tuesday showed consumers are getting much more confident about the economy, with consumer confidence rising  more than expected and consumer expectations of future conditions sharply higher. This was in spite of indications that home prices may be taking a turn for the worse. Both results put pressure on mortgage rates, but it was Wednesday’s news that accounted for most of the week’s movement.

Wednesday, payroll firm ADP reported the results of its survey of private employment, announcing an increase of 93,000 private-sector jobs. Adding in 39,000 jobs that were added to prior months results, this nearly doubled analyst expectations of 58,000 jobs gained. Later that morning, the Institute for Supply Management announced firm growth expectations in manufacturing. Mortgage rates increased roughly .25% on the day, a huge move for any single day.

Thursday provided slight relief to mortgage markets, as weekly unemployment claims came in lower than expected, and markets bounced back slightly from the huge sell-off of the prior day. Claims rose to 436,000, but the trend continues lower, which suggests that there may still be some weakness in hiring. Traders stuck to the sidelines, though, as anticipation of Friday’s Employment Situation Report urged caution.

The jobs report was nothing short of eye-popping. Employers added a mere 39,000 jobs in November, and the unemployment rat rose to 9.8% as more workers joined the labor force than jobs were added. This initially sent mortgage rates sharply lower, erasing much of the losses from Wednesday. By the end of the day, though, mortgage pricing had given back all of the gains, as traders lost conviction.

So, in spite of mixed news for the week, mortgage pricing was about 1 point worse than at the outset of the week. Ordinarily, there is little news over the weekend that drives markets. That wasn’t the case this weekend. The European debt crisis continued to find its way into headlines. Additionally, Federal Reserve Chairman Ben Bernanke gave an interview on 60 Minutes this weekend, strongly defending the Quantitative Easing program and suggesting he continues to be more concerned about the risk of deflation and slow economic growth than about inducing excess inflation in the economy.

He also remarked that, should raising interest rates become necessary, the Fed is prepared and able to do so in “15 minutes”. Mortgage-backed security prices have opened the week significantly better as a result. The remainder of this week will be a little thinner on economic news, as follows:

Monday:

  • no significant news

Tuesday

  • $32 billion in 3-year notes to be auctioned
  • Consumer credit

Wednesday

  • $21 billion in 10-year notes to be auctioned

Thursday

  • Weekly unemployment claims
  • Wholesale trade – inventories
  • $13 billion in 30-year bonds to be auctioned

Friday

  • International trade data: Balance, inflation
  • Consumer sentiment

This week’s Treasury sales will provide a test to markets for the future direction of interest rates. If the auctions are well subscribed, mortgage and Treasury rates could stabilize at or near the current level, and may even improve somewhat. If not, we will continue to see rates on the rise as markets keep looking for new equilibrium. 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 week!

Related articles:

Last Week’s Report

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.

http://lenderama.com/2010/11/29/mortgage-rates-continue-fluctuate-economic-data-shows-improvement/

Mortgage Rates Continue to Fluctuate as Economic Data Shows Improvement

Mortgage rates tenuously hold new levels, average rises to 4.40%; GDP growth revised higher; Jobless claims down sharply; Preliminary “Black Friday” data suggests strong growth in Consumer Spending; Employment data looms

Mortgage pricing was poised to close last week on its first weekly gain since the impact of QEII was felt in markets when a sharp selloff on thin volume took place on Wednesday. The underlying reason: economic growth just might be coming faster than expected.

Last Tuesday, the Commerce Department reported on 3rd quarter GDP growth, revising results higher from 2.0% growth to 2.5%. While this is still too slow a pace to rapidly change the unemployment rate, it was sufficient to send ripples through economic markets, and it suggests that the US economy could be more resilient than recent comments from Federal Reserve officials suggest.

Wednesday turned Tuesday’s gains on their head. The key announcement was new claims for unemployment: only 407,000 Americans applied for unemployment benefits in the prior week, the smallest number since July 2008 when the financial crisis was only beginning to emerge. This came as a bit of a shock to markets expecting a significantly higher level of claims, as it suggested that the economy could be turning a corner. Mortgages sold off heavily, with the cost of some rates increasing by as much as 1 point, or 1% of the loan amount.

Mortgage prices may have oversold on Wednesday, as they saw some recovery in Friday’s holiday session. It is not uncommon to see an overreaction such as this on a holiday-shortened week when many traders go home very early, if they sign into markets at all. Also affecting markets was continued fallout from the Irish debt crisis and bailout. Borrowing costs for European governments have been increasing lately as problems in Ireland have come to a head. This produces results quite similar to the “flight-to-safety” seen earlier this year in the face of the Greek debt crisis, as traders bought safer debt, usually US government securities, on fears that other assets will struggle to hold value.

Mortgage pricing has improved at the open this morning on further Irish concerns, as well as on the return of many traders in for the full week who had sat out the holiday. This week contains too much data to suggest that mortgage pricing will hold current levels though. It is quite likely with the huge volume of highly influential employment and manufacturing data to be released that mortgage rates will rise significantly this week. Here’s a look at what’s in store:

Monday:

  • no significant data

Tuesday:

  • Consumer confidence
  • S&P Case-Schiller Home Price Index
  • Bernanke speaks

Wednesday:

  • ADP Employment Report
  • ISM Manufacturing index
  • Construction Spending
  • Productivity and Costs

Thursday:

  • Jobless claims
  • Pending home sales

Friday:

  • Employment Situation
  • Factory orders

Clearly, data on jobs dominate this week’s news. If the employment situation is better than expected, mortgage rates will jump sharply. It appears likely that the employment situation could be quite a bit better than anticipated. Recent unemployment claims have been declining sharply, and consumer spending and sentiment have been rising, all suggestive of an improvement to the situation. Analysts are currently expecting an increase in payrolls by 168,000 jobs for November, but it is likely to be significantly more than that, with perhaps as many as 225,000 jobs added by private employers. The unemployment rate may rise; analysts are predicting 9.7% over the current 9.5%, but that rise will be due to the return of many discouraged workers to their job search.

This is a very risky week to float mortgage rates. I would suggest locking in whenever possible. 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 week!

Related articles:

Last Week’s Report

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.