Mortgage rates spent all last week attempting to recover from a few weeks of bad news in the bond market. We went home on Friday afternoon in good spirits as rates were seen at their best levels since the week before the Fed exited the mortgage backed securities market.
The week ahead is very busy with many economic reports, Federal Reserve speakers, and the kick-off of earnings season. Typically during corporate earnings season, strong reports lead to a stock market rallies which unfortunately come at the expense of bonds. The opposite generally occurs when earnings are worse than expected. Earnings season kicks off today after the closing bell with Alcoa reporting. Beyond that mortgage rates will battle a full economic data calendar which is anticipated to show continued improvement in the manufacturing sector, a more content consumer, tame inflation, and more weak housing starts and building permits numbers.
Here are a few highlights for the week:
- Open of earnings season. Alcoa reports after the bell
- International Trade (low to medium impact) The Trade Balance report measures the monthly difference between what our nation imports and what our nation exports.
- Import and Export Prices (low to medium impact)
- Weekly Mortgage Applications Index (low impact)
- JP Morgan Earnings
- Consumer Price Index, measures inflation on the consumer level (medium to high impact)
- Retail Sales (medium to high impact) If sales figures are strong, that is a sign of economic expansion which will pressure mortgage rates higher. As a general rule, positive economic news is bad for mortgage rates while bad economic news is good for mortgage rates.
- Beige Book, This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. (medium impact)
- Ben Bernanke speaks on the Economic Outlook (medium to high impact)
- Weekly Jobless claims (medium impact)
- Empire State Manufacturing Survey (medium impact)
- Industrial Production, which is a measure of the strength of the manufacturing sector by measuring the output at U.S. factories, utilities and mines. Higher industrial production would be a positive economic indicator which would benefit the stock market at the expense of the fixed income sector. (high impact)
- Philadelphia Fed Survey (low impact)
- Housing Starts which estimates how much new residential real estate construction occurred in the previous month. (medium to high impact)
- Bank of America Earnings
- Consumer Sentiment (medium impact)
READ MORE for a more detailed look at the Week Ahead
When the day began, lender rate sheets were very similar where they were set on Friday, however both benchmark Treasury yields and mortgage-backed security prices have rallied throughout the session. This has allowed several lenders to reprice for the better. The par 30 year conventional rate mortgage is still holding in the 4.875% to 5.125% range for well qualified consumers though. To secure a par interest rate on a conventional mortgage 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. For consumers with lower FICO scores and higher loan to values, you should consider a government FHA loan. FHA loans have similar rates to conventional loans but do come with higher costs.
If you can lock today at 4.875%, there is nothing wrong with that! If you can tolerate some added risk, I feel like floating "day to day" is still the worth it.