Mortgage rates went into the weekend on a sour note after benchmark Treasury yields moved higher and mortgage backed security prices fell. From a "glass half full" pespective, despite the Friday reprices for the worse, rates end the week basically where they started.
Before I tell you what happened with mortgage rates today, I must remind what I wrote on Friday and will likely continue to write into year end:
AQ and MG have been talking about "year end" a lot. They note "year end" as a very slow time on Wall Street. This implies the marketplace may move in a volatile manner as many traders take holiday vacations while others simply stop trading so the accounting department can clean up the books for shareholder annual review. Basically, unless some form of major headline news is presented, most of the price movement and rates direction we see over the next two weeks will not be indicative of things to come in 2010.
I cannot stress this enough...the rates market is very volatile. If you happen to be floating a loan that is expected to close this month...I WOULD LOCK. No reason for unexpected, random interest rate movements to ruin your holidays.
Now for today...
Mortgage rates moved higher as Treasury yields rose and MBS prices fell. Reprices for the worse were widespread.
Reports from fellow mortgage professionals indicate mortgage rates to be higher today. The best par 30 year conventional rate mortgage does remain in the 4.75% to 5.00% range for well qualified consumers, but fewer and fewer lenders are offering these rates. To secure a par interst 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 including an estimated one point loan origination/discount/broker fee. If you are not planning on keeping your home for more than three years you might want to pay less in closing costs buy you will have to accept a higher interest rate. To remind readers, securing a mortgage rate is like buying anything else. You can pay more and get a better/lower interest rate or you can pay less and secure a higher interest rate. Consult with your mortgage professional on a break even date which can help you decide the most optimal scenario.
Here is what AQ wrote this morning in regards lender strategies:
From a loan pricing standpoint. I recall this time of year as being one of my favorite for determining rate sheet rebate. I viewed it as so...
Most borrowers have already locked in and many have actually already closed. Who wants to deal with a loan closing at this time of year? My main goal was to limit the amount of work I had to do over the next 10 days.
I made sure all my positions were square, I double checked pricing, hounded post closing to get my files shipped, and started working on monthly P&Ls. My eyes were generally off the market as my mindset was " GET WORK DONE, LEAVE THE OFFICE ASAP". Processors, UWs, Closers, Shippers, and Accounting were all in the same boat. (Compliance always cared)
This was not an originator friendly environment. To avoid extra work and disruption...I always baked a few extra bps into my rates. My innate sense of capitalism took over. This sentiment was shared up and down the mortgage pricing supply chain. Not matter how the market was moving....primary/secondary market pricing spreads were getting wider.
Plain and Simple: Don't be surprised or angry if rate sheets start to get more expensive...regardless of how the market behaves.
PS: This capitalistic approach should also begin to play out in the interbank lending market. LIBOR should start to tick higher.
So, the point I take from that is: Even if MBS prices recovery from today's sell off, mortgage rates may not improve. I hope everyone is already locked up at this point in the month (at least if you are closing in Decemeber).
Tomorrow we get the final reading of second quarter Gross Domestic Product. The initial reading indicated our economy grew at a 3.5% pace, with the revised estimate being lowered to an annualized pace of 2.8%. Economists expect further downward revision with the final estimate to show a growth rate of 2.7%. GDP is the broadest measure of total economic activity and encompasses every sector of our economy.
Also reported tomorrow is a reading on the strength of the housing market with the Existing Home Sales report. This data totals the number of previously constructed homes in which a sale closed during the prior month. Existing home sales for October came in much higher than expected at an annualized rate of 6.10 million which was a record 10.1% increase from the prior month. Economists are expecting further improvements with existing home sales due to the extension of the home buyer tax credit and near record low mortgage rates. Expectations call for existing home sales to post a 6.25million pace with this report. Many economists believe that until home values stabilize and start to increase our economy will have trouble gaining momentum, which makes tracking home sales data more and more important.