First of all I would like to thank AQ for taking over my blog last week while I enjoyed some much needed vacation time. Thanks Adam!
Mortgage rates withstood everything related markets could throw their way last week. While several market crosswinds, created by new economic data releases, the beginning of earnings season, and the publication of the Federal Reserve's FOMC meeting minutes, manage to push stocks and benchmark bond yields in a wide range, mortgage rates went about their business as if they were detached from reality. The major lenders were battling it out for business...
The events calendar in the week ahead focuses on the health of housing, the Federal Reserve's semi-annual monetary policy report to Congress, corporate earnings, and European Union bank stress tests. Here is a look the scheduled events that may or may not influence the direction of mortgage rates....
- Building Permits: Building Permits data provides an estimate on the number of homes planning on being built. This indicator basically tracks how much future construction activity we should expect to take place in the future. This data is a part of Conference Board's Index of Leading Economic Indicators. (medium impact)
- and Housing Starts: Estimates how much new residential real estate construction occurred in the previous month. Housing Starts estimates how much new residential real estate construction occurred in the previous month. New construction means digging has begun. Adding rooms or renovating old ones does not count, the builder must be constructing a new home (can be on old foundation if re-building). Although the report offers up single family housing, 2-4 unit housing, and 5 unit and above housing data, single family housing is by far the most important as it accounts for 70-80% of total home building. (medium impact)
- Weekly Mortgage Applications Index (low impact): Since the Home Buyer Tax Credit expired the housing market has been under more scrutiny, so this report has more potential to move mortgage rates if combined with the right conditions, like a pessimistic message from the Fed when...
- Ben Bernanke delivers the Fed's Semiannual Monetary Policy Report to Congress. (medium to high impact). Expect much talk about the extent to which the economy has stopped expanding.
- Jobless Claims (medium impact): expected to rise from the multi-month low last week
- Existing Home Sales: Many economists believe housing must fully stabilize and begin to improve before the overall economy can gain recovery momentum. This makes tracking home sales data of much more importance today than in past years. (potentially high impact)
- Leading Indicators (low to medium impact)
- Treasury announces the terms of the following week's debt auctions. 2-year notes, 5-year notes and 7-year Treasury notes. (bigger impact in the week after)
- No data
HERE is the full events calendar including economist forecasts.
After several days of behaving as if no other market existed, mortgage rates finally snapped back to reality today. Total consumer borrowing costs moved a few basis points higher as mortgage-backed securities prices fell from record levels. Most lenders were offering higher rates on first release this morning, so reprices for the worse weren't widespread, but the lenders who improved pricing vs. Friday did end up repricing for the worse later in the afternoon.
The best 30 year fixed conventional mortgage rates remain in the 4.375% to 4.625% range for well-qualified consumers, but 4.50% is what we consider "Best Execution". To secure a par mortgage rate you must have a FICO credit score of 740 and minimal loan level pricing adjusting. You may elect to pay less in fees or no costs at all, but you will have to accept a higher interest rate. This can be a good option for consumers who are not planning on owning their current home for more than 3 years. The rate on a no cost loan should be around 4.875-5.00%% for well-qualified consumers.
We look for mortgage rates to reattach to related markets this week. If stocks rally, rates will rise. If stocks sell off, rates will rally. If you are a risk taker and today’s rates are not good enough for you, which I don't know why they wouldn't be, keep an eye on the stock lever. I have a few loans floating, but these are borrowers who are 45 days out until closing. If stocks rally and lenders start repricing for the worse, I will be locking a few more loans.