Although secondary mortgage markets bounced around a wide range, mortgage rates held steady yesterday. At the start of the day, MBS moved considerably higher as a result of weakness in global equity markets. However when stock markets opened, MBS prices were unable to sustain gains and prices fell. As the day wore on MBS prices recovered losses, but ended up closing slightly lower on the day. Although some lenders repriced for the worse early in the day, many repriced for the better by the end of the day. All in all, mortgage rates were relatively unchanged near August lows.
Today's busy economic data schedule kicked off with the U.S. Department of Labor's Weekly Jobless claims. In addition to tallying new unemployment claims, this report also tracks claims continuing claims. There are two ways that continuing claims fall. One is that the filer finds a new job and the other is the benefits run out. So although there have been recent declines in continuing claims, it can be largely attributed to loss of benefits as opposed to new job creation.
Today's numbers showed slightly more claims than expected. Continuing claims also were up from last month. Though the pace of losses has eased, reports like this suggest that protracted weakness in labor markets is indeed the reality. Companies appear to still be in cost cutting mode as consumer spending remains depressed. To read more, click here.
Also out this AM, the Leading Indicators Index (which is a composite index of ten economic indicators intended to "lead" upcoming economic activity). This report came in very much in line with expectations. Regrding whether or not this report has the predictive power that it's name suggests, this is the fourth month in a row the index has moved higher.
The Federal Reserve Bank of Philadelphia brings us the last significant data of the AM with the release of the Philly Fed index. This report gives market participants a read on the strength of business conditions around the Philadelphia region. Readings above 0 indicate expanding or improving conditions while readings below 0 indicate contracting conditions. Though not by a wide margin, and not significantly outside the realm of expectation, the report shows a positive reading for the first time in about a year.
At 11am eastern, the U.S. Department of Treasury announced the amount of treasuries to be auctioned next week. All three offerings are unchanged from July. The package totals $109 bln and consists of $42 bln 2s, $39 bln 5s, and $28 bln 7s. 2s will go off on Tuesday, 5s on Wednesday, and 7s on Thursday. The issues will settle on Monday August 31 and will raise $90 bln in new cash for Treasury. The market was expecting the Treasury to increase this offering, because the auction amounts were unchanged...both MBS and TSYs prices moved higher.
Reports from fellow mortgage professionals are indicating that today’s par 30 year fixed rate mortgage remains in the 4.875% to 5.125% range for the best qualified consumers. In order to qualify for a par interest rate you must have a FICO credit score of 740 or higher, a loan to value of 80% or less and pay all closing costs including one point loan origination/discount/broker fee. As always, you can elect to pay less fees but your interest rate will move higher.
I will continue to caution if you are floating your interest rate. Recent history has shown that lenders are unwilling to offer 30 yr fixed rates lower than 4.875%. Learning from recent history is important. Until stocks selloff in a meaningful manner, dont miss an opportunity to lock in a 30 year fixed rate mortgage under 5.00%