Mortgage rates moved slightly higher on Friday following the release of the Employment Situation report. The increase was however not huge as the ever so important jobs report was unable to spark any major shifts. All in all, mortgage rates were mostly unchanged to slightly lower for the week. This marks the longest stretch that mortgage rates have held near 5.00% since early this year.
The long weekend is behind us, summer vacation is over on Wall Street, and politicians are returning to Washington.Time to get back to work. The week ahead is extremely light with economic data. The highest impacting events will be three Treasury auctions. That said, although this is supposed to be a time when markets get back to work, we wouldn't be surprised if trading activity remained slow and wild price action continued in financial markets. To read more on the week ahead, click here.
The only relevant event set to take place today is the first of three Treasury auctions to be held this week. The U.S. Department of Treasury will auction $38billion in 3 year notes at 1pm eastern. As always with auctions, the supply is known in advance so market participants will look at the results of the auction to grade its success. So far this year, even though there have been continued record issuances, demand has remained quite strong. This strong demand for our nation’s debt has helped keep mortgage rates low.
Tomorrow, the Treasury Department will auction off $20billion in 10 year notes and Thursday the auctions end with $12billion of 30 year bonds being offered to the highest bidder. Matt and AQ will cover these auctions in their MBS Commentary blog.
So not much in the form of economic reports to move the markets this week. This implies mortgage rates may be subject to the sentiment of stock traders. If stocks move higher, bonds may move lower (in price) which would be a negative for mortgage-backed securities and mortgage rates. Will recent weakness in stocks follow through or will equity traders push indexes to new 2009 highs? What is your opinion on this subject?
Reports from fellow mortgage professionals indicate that the 30 year fixed conventional par mortgage rate remains in the 4.875% to 5.125% range, for well 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 at 80% or less, and pay all closing costs associated with the loan including one point loan origination/discount/broker fee. As always, you can elect to pay less in fees and secure a higher interest rate or you can pay additional fees to buy down the interest rate. I only advise the paying of discount points when the client is positive that they will keep the subject property for long enough to recover the points they have paid. If you are not sure how to calculate your breakeven point, let me know and I will give an example.
Quite often I get asked by consumers how to compare offers from two different lenders. When reviewing two different good faith estimates, first look at the 800 lines. This is where you will find fees charged by the loan officer and lender completing the transaction. The remainder of the good faith estimate should be relatively the same regardless of who you pick to complete your transaction. The 1000 lines are used to establish an escrow account and will be the same regardless of the lender. This section will be based on how much your home owners insurance and property taxes are for the year. The 1100 lines are the title charges. These are the fees the title company charges to complete the closing of your transactions. Some title companies are less expensive than others, but these fees should be very close from one lender to the next. None of the title fees can go to the loan officer completing your loan.