Hi Everyone! Vic is on vacation so I'll be covering his posts while he is away.
The economic calendar was light last week and markets were generally slow as many investors used the holiday shortened work schedule as an excuse to get much needed R&R.
While benchmark interest rates were pressured higher by a modest rally in stocks, consumer borrowing costs managed to hold their ground and went into the weekend only a few basis points more expensive vs. the previous Friday. This left the best 30-year fixed conventional mortgage rates in a range between 4.375 and 4.625% (for well-qualified borrowers). Rate increases were only obvious via an uptick in "discount points" charged by lenders. The best day to lock was Wednesday. READ MORE
The week ahead offers more in the form of scheduled data and events. This includes $69 billion in Treasury debt auctions and the beginning of corporate earnings season.
HERE is a full economic calendar
HERE is more perspective on the factors that will move the markets including a breakdown of key earnings releases
Although the calendar has more to share in the week ahead, mortgage rates are still expected to take their directional guidance from the sentiment of related markets. Meaning: if stocks rally, mortgage rates will go up. If stocks fail to extend the positive progress that was achieved last week, consumer borrowing costs will cheapen.
After several weeks of operating in a pessimistic investing environment, the sentiment of the marketplace appears to be shifting in favor of riskier assets like stocks. This is a factor of corporate earnings season. Many analysts are forecasting strong earnings because firms have cut expenses to make profiting more possible. While this does not reflect an improvement in macroeconomic conditions (jobs and housing), the markets are highly focused on taking advantage of short term opportunities... and healthy earnings would would likely lead stocks to higher ground and force mortgage rates up.
If the opposite occurs and stocks sell off, mortgage rates would improve. Unfortunately, for technical reasons associated with the mortgage securitization process, we do not see the par 30-year fixed mortgage rate falling to 4.25% any time soon. HERE is an explanation of those technical factors. Assuming stocks fail to maintain their optimistic outlook, lenders would pass along loan pricing improvements in the form of reduced closing costs (less discount points).
The best par 30-year fixed mortgage rates remain in the 4.375 to 4.625% range. I posted a rate sheet comparison HERE if you're interested.These quotes are the baseline scenario for well-qualified borrowers. If your middle FICO score is less than 740 or your loan to value is over 80% (conventional not FHA) you can expect to pay higher closing costs. HERE is a breakdown of loan level price adjustments.
I expect consumer borrowing costs to increase in the days ahead. I would not be floating my interest rate in this environment.