Yesterday was a great day for mortgage rates and consumers as rates on mortgages dropped over .50% but later in the day they increased giving back some of the gains.  This is good for the consumer as it will allow a lot of home owners to refinance into lower rates with lower payments, and it will also encourage consumers to get out and buy a new home.  A great way to get our economy going is to get housing going and that is why we have been saying for quite some time the government is doing all they can to encourage lower rates.  I use encourage lower rates because the government does not set rates on mortgages, investors set the rates by buying mortgage backed securities.  As they buy more mbs, the price moves higher and the yield(interest rate) moves lower.  The government announced yesterday that they will invest up to $600 billion into buying mbs, this is what caused a massive increase in price and lower rates.  As with anything you buy, when more money comes to the table prices tend to increase. 

This morning’s data is just hitting the wires…

      1. Durable orders, expectations are -2.5%, actual -6.2%   mbs positive

      2. Personal income, expectations are .01% increase, actual 0.3% increase   So, consumers have more money to spend and prices are lower,  good news for the economy thus mbs negative

      3. Jobless claims, expectations are for 540,000, actual 529,000     Less claims but not to much of a variance but still a mbs negative.  Continuing jobless claims 3.96 million which is slightly better then last weeks 4.01 million

      4.Personal Consumption Expenditure, which is a gauge of inflation on the consumer level, the core rate which excludes food and energy prices came in at  0.2%, leaving year over year at 2.1% after last months 2.2% reading. This        continues to show inflation easing on the consumer.  MBS positive

      5. Personal spending, expectations are -0.7% decrease, actual -1.0% decrease.  This continues to show weakness in our economy as consumers are spending less and less, which is mbs positive.

We will also receive today Chicago PMI, Consumer Sentiment and new home sales.

1. Chicago PMI, which is a gauge of manufacturing, expected to show a 38.5 but came in worse at 33.8, mbs positive
2. Consumer sentiment, expectations for a 58.0 but came in worse at 55.3, mbs positive
3. New home sales, expectations for 450,000 but came in down 5.3% to 433,000 

Most of the reports released today are friendly to mortgage backed securities.  We have an early close today due to the holiday and the volume should be light.  With the massive improvements we have seen over the last 2 days, locking later today would be a very safe call as rates have much more room above then below.  Meaning, rates could move much higher then the could move lower.  Already this morning we have recaptured most of the loses from yesterday but still not quite at the highs.  At lender cutoff, evaluate your loan or loans and make your decision based on your risk tolerance.   

As for my pipeline of loans, I will be very likely to lock later today.  I say later today as I want to allow as much time for lenders to price in the gains we have seen.  With tomorrow being a holiday and another short trading day Friday (bond market closes at 2pm), it might be wise to lock your loans.  Could rates continue to drop? Absolutely, but you have to know when to take your chips off the table and pocket the gains.  With tomorrow being Thanksgiving, the next update will be out on Friday.  Hope all have a wonderful Thanksgiving and have plenty to eat.