Mortgage rates are down. Mortgage rates are even lower! Mortgage rates are at new 2010 lows!! Mortgage rates are HIGHER!!!
That's the most economical way to describe the directional movements of mortgage rates this week. Although the road was rocky (lots of reprice watching), mortgage rates generally carried strong momentum all the way into Thursday morning. Then the storm clouds rolled in and stocks went on a tear yesterday afternoon which forced lenders to reprice for the worse. The damage wasn't terrible but mortgage loan pricing definitely took a hit yesterday. To remind readers, as MBS prices move lower, consumer borrowing costs move higher.
The week came to a close on an interesting note, economic data actually moved markets today!
Two scheduled economic reports made top news headlines: RETAIL SALES and CONSUMER SENTIMENT
Retail Sales data reports on the monthly change in total sales receipts taken in at retail stores. The Census Bureau's Retail Sales release is the first report of the month on consumer spending, so it's capable of affecting the sentiment of the marketplace. This data released today covered consumer spending in May.
The report was disappointing.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May were $362.5 billion, a decrease of 1.2% from the previous month. This is however 6.9 percent above May 2009. The market was expecting +0.2%. WORSE THAN EXPECTED. A decline in spending on building materials and gardening equipment was cited as the "weakest link". This may be a factor of the expiration of the homebuyer tax credit. READ MORE
Stocks, which had rallied in the overnight trading session, fell after the report and benchmark yields fell as investors allocated funds into risk averse U.S. Treasuries (bond prices higher=yields lower). This was a positive for mortgage rates, but still early in the day and many lenders had yet to publish loan pricing. Up next on the schedule: the Consumer Sentiment survey at 9:55 am.
The Reuter’s/University of Michigan’s Consumer Survey Center surveys 500 households on their personal financial conditions and attitudes about the economy. Market participants track consumer attitudes to get a gauge of future economic momentum. An optimistic consumer is more likely to spend which benefits stock markets. A pessimistic consumer is more likely to save, which supports low yields in the bond market.
The preliminary read of Consumer Sentiment in June was BETTER THAN EXPEXTED, with the index rising 1.9 points to 75.5 vs. estimates for a read of 74.5. After the release stocks recovered early session weakness and ended up closing just off the highs of the week. The S&P was +0.44% at 1091.60. But guess what, interest rates rallied too! After all that back and forth between stocks and bonds, I think it's funny they both rallied today.
A few lenders, those who published pricing early in the morning, ended up repricing for the better. Other lenders, those who priced after the Retail Sales release, were able to keep mortgage rates unchanged vs. loan pricing yesterday afternoon.
While it will cost a borrower almost 50 basis more at the closing table (0.50% of the loan amount), 4.50% is still available for most WELL-QUALIFIED borrowers. We are however seeing most borrowers close at a 4.75% or 4.875% rates. WHY? THIS IS WHY 4.50% is not widely offered. 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. If you are not planning on staying in your home for more than 3 years, you should consider a no cost refinance which should offer you a interest rate around 5.25%.
If you floated this week, how much did your mortgage rate change? Did it change?
Regardless of modest weakness late in the week, I find it hard to pass on this loan pricing. If you are floating your loan rate, are you purchasing a house or refinancing? I would assume most purchase deals are already locked and awaiting a "clear to close". That leaves mostly refinancing borrowers in the "float boat". If you are still floating, what are you waiting for? Do you think stocks are about to sell-off? The only reason I feel anyone should be floating is if they are more than 30 days away from closing.