Mortgage rates went into the weekend on another 3 day losing streak, leaving rate watchers in a defensive stance following a failed recovery attempt earlier in the week.
We had no major economic releases on the calendar today but data picks up tomorrow with a look into the status of the home building market. We get Housing Starts and Building Permits for August first thing in the morning. This will be followed later in the day with the FOMC's decision on monetary policy. It is almost certain that there will be no change to the current Fed Funds Rate of 0 to .25% but market participants are anxious to hear the Fed's position on the potential for another asset purchase program (quantitative easing). Mortgage rates would likely benefit from a more bearish outlook from the Fed while they would come under pressure if the Fed says the economy is improving at a faster rate than previously expected.
Thursday will be the busiest day of the week with three data releases and an announcement from the Department of Treasury regarding soon to be auctioned government debt. The first report to hit will be weekly initial jobless claims, followed by another snapshot of the housing market with Existing Homes Sales. Lastly we get Leading Indicators. Friday arguably holds the most important release of the week, Durable Goods Orders. The week comes to a close with New Home Sales.
HERE is the full calendar for the week ahead.
Mortgage rates started the week by extending their losing streak to four days, but halfway through the day the market improved and many lenders repriced for the better. This left consumer borrowing costs about unchanged vs. the loan pricing we saw on Friday morning. The par 30 year conventional rate mortgage remains in the 4.25% to 4.50% range for well qualified consumers. 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. If you have a lower FICO score or a higher loan to value, you should consider an FHA loan which offers similar rates, allows for lower FICO scores but with higher costs.
So far following the strategy of "lock at the MBS price highs and float at the MBS price lows" has worked out well for us. This strategy will be put to the test in the week ahead though. MBS are running out of room in their range and stocks seem like they could rally on, which we have to assume would push consumer borrowing costs higher. While floating might pay off we must warn that we are operating in a high risk environment. With that in mind, anyone who has not locked and needs to do so before the end of the month should consider taking the reprices for the better we saw today and getting out of the market before things get worse. We remain on high alert...
READ MORE about the crossroads currently facing mortgage rates