In honor of Veteran’s Day, the fixed income market was closed yesterday. A few lenders did issue rate sheets, most were priced conservatively, which is a common strategy on bank holidays.
After a slow start to the week, we finally got some economic data to digest this morning. First out was the Mortgage Bankers’ Association’s Weekly Application Index. This data tracks the weekly change in mortgage applications at major lenders. An increasing trend is positive for stocks since the purchase of a new home leads to many other purchases. Additionally, an increasing trend in refinances should also lead to more consumer spending as home owners refinance to lower mortgage rates and lower mortgage payments giving them more cash flow.
The report indicated that purchase applications fell by almost 12% last week while refinance activity posted an 11.3% increase. With mortgage rates declining last week it isn’t surprising to see the surge in refinance activity. However, the plunge in purchase applications may indicate future problems in the housing sector. READ THE MND STORY
At 8:30, Weekly Jobless Claims data hit newswires. This data totals the number of Americans who filed for first time unemployment benefits in the prior week. Additionally, we get received continuing claims data which totals the number of Americans who continue to file for benefits due to the lack of finding a new job. Recent reports have shown the number of people filing for benefits to be decreasing.
The Department of Labor reported first time claims fell more than expected by 12,000 to 502,000 for the week ending November 7th. Economists had expected a reading of 510,000. This is the lowest level of initial claims since January. Continuing claims also fell more than expected by 139,000 to 5.63 million, the eighth consecutive decline. Continuing claims do not take into account the number of Americans that are receiving extended benefits under current stimulus programs. However, the number of Americans in this category also declined by 6,000 to 4.04 million.
At 1pm, the Treasury will announce the results of this week's final auction, offering $16 billion 30 year bonds. As always with treasury auctions, the amount is known in advance so market participants look at the demand for our nation’s debt to gauge the auctions success. Strong demand, especially by foreign investors, is one of the many factors that have contributed to record low mortgage rates. AQ and Matt will cover the auction once it is complete shortly after 1pm on the MBS Commentary blog.
Reports from fellow mortgage professionals indicate mortgage rates holding steady. The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. You can elect to pay less in fees and secure a higher interest rate which is ideal for consumers not planning on keeping their home for more than three years. Remember, securing a mortgage rate is like buying anything else, you can pay more in fees and get a better rate or pay less in fees and secure a higher rate.
There is not much room for MBS prices to move higher or for mortgage rates to move lower at the moment. If you are happy with the rate being offered to you and don’t want to risk rates moving higher, you should lock today. While there still is some room for MBS prices to tick higher, it is better to have locked when you should have floated than it is to float when you should have locked.
Tomorrow is another light data day with the only significant reports being International Trade and Consumer Sentiment. International Trade is expected to show our trade imbalance increasing while Consumer Sentiment is expected to post modest improvement in consumers attitudes.