Mortgage rates extended their losing streak to three (3) days yesterday. The losses were brought on by a rally in the stock market. Mortgage-backed securities price moved steadily lower throughout the day before closing at their session lows. Most lenders ended up repricing for the worse as a result.
Two economic data releases moved mortgage rates today. First up were Weekly Jobless claims. Released by the Department of Labor, this report provides three timely metrics on the health of the labor market:
Since our economy is driven by consumer spending, market participants track employment data to get a gauge on economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the overall economy but generally helpful in keeping consumer borrowing costs from rising.
Here are the results:
The market was caught off guard by the large increase in the number of initial jobless claims. This weaker than expected Jobless Claims report will lead economists to worsen their Non-Farm Payroll estimates. Following the release of this data, stock market futures moved much lower and interest rates began to rally after moving higher overnight.
This was the first "event" that moved mortgage rates today. The second "event" was the release of the Philadelphia Federal Reserve's Business Conditions Survey.
This survey gives market participants a read on the strength of business conditions around the Philadelphia region. Readings above 0 indicate conditions are improving while readings below 0 indicate business activity is contracting.
The "Business Conditions Index" fell to -7.7 in July. To put that in perspective, this index was at 20.0 in May. Since then it has fallen 27.7 points all the way into negative territory. The market took this much worse than expected data as another reason to believe the economic recovery had slowed drastically.
Following the release, stocks continued to sell off and benchmark interest rates rallied back to the lows of the week. While mortgage backed securities lagged Treasuries, most lenders were able to reprice for the better by the end of the day,
After reprices, rate sheets are improved vs. offers yesterday. The best execution par interest rate remains in the 4.25% to 4.50% range for well qualified consumers. If you are seeking a 15 year term, you should expect a par rate in the 3.75% to 4.00% range.
We still feel rates will rise in the day's ahead. If you are closing within the next 15 days we recommend locking. Longer term closings should also consider locking but floating may pay off if the economic data continues to weaken. The economic calendar is empty tomorrow. If you plan to float it out in the short term, keep an eye on stocks. If they rally, mortgage rates will rise.