Jobless claims report was released with first time filers coming in at 467k. Economists where expecting a much higher number of 550k. The 4 week moving average also came in slightly better at 525k but the continuing claims came in higher at 4.61million. Better then expected jobless numbers usually is a negative for mortgage backed securities but it appears that we are going to get no significant reaction. When I say a negative for mbs, that means that investors start to sell mbs which drives the price lower causing mortgage rates to increase. As mortgage backed securities move higher in price that drives mortgage rates lower. Currently, we are unchanged from going out levels yesterday which is 5pm eastern time.
Another significant item for the day will be a 10 year Treasury auction at 1pm. If you are a reader of my blog, you will then know that mortgage rates follow the price of mortgage backed securities and not treasury notes. However, you have heard the saying that birds of a feather flock together, what I mean is that mbs and treasury notes are both fixed income investments, so they do tend to trend in the same direction. With the added supply of fixed income investments in the market place, it could pull the price of treasuries lower which sometimes brings the price of mbs with them. I am not overly concerned that this would happen as the Federal Reserve could step in and start to buy mbs which will keep the price higher. The Federal Reserve has stated that they will spend up to $500 billion on mbs which should prevent any significant sell off. Today at 4pm we get the official report from the Fed which will let us know how much they have spent on mbs.
Our stance of floating still continues for loans closing more then a week from today. It appears that for the next few weeks, you should float your rate until you are about to close, then lock on a 15 day lock which will get you the best pricing. Even though we feel rates will continue to move lower over the months ahead, do not put off closing for a lower rate. Life happens and things outside your control can change which may cause you not to be able to pull the trigger and close later on. I suspect again like yesterday, lenders rate sheets will vary greatly. I saw par interest rates from lenders any where from 4.5% to 5.125% for a 30 year fixed. Any time you see me post a rate on my blog, I am posting a rate that will require you to pay the closing costs and 1 point to get that rate and you have credit score over 720 as the best rates go to those with the best credit. You can choose to pay less costs and take a higher rate if you like, but I recommend that anyone keeping their home for more then 3 years to pay the closing costs and point to secure the best rate and over time you will recoup the closing costs with a lower payment and lower interest rate. If you choose to pay less closing costs and take a higher interest rate, it will cost you much more over time due to a higher payment and a higher interest rate.
If any significant things happen today I will post back but enjoy the cruise on the float boat. However, if your loan originator has quoted you a sub 5% rate and you don’t want to risk anything, then go ahead and lock. Anytime you can secure a 30 year mortgage under 5%, that is a good thing but I suspect that we will see 30 year mortgage in the low 4’s sometime in the months ahead.