Jesse Kenner Mortgage Blog

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Category: Weekly Review

What’s Ahead For Mortgage Rates This Week : February 28, 2011

Employment data is released FridayMortgage markets improved last week as Wall Street’s concerns about the Middle East trumped its fears of inflation. Conforming and FHA mortgage rates in Rhode Island fell to a 3-week low.

Last week marked the second straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.

It’s been a bout of good fortune for rate shoppers and home buyers.

In addition, according to Freddie Mac’s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.

The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.

This week, it’s unclear in what direction mortgage rates will go.

On one side, there’s ongoing unease related to protests in Libya and its neighbors, and that’s driving safe haven buying. 

“Safe haven buying” describes when investors flee risky situations and put their money in the safest places possible. Mortgage bonds are one such place, so when safe haven buying is in effect, bond demand is high so bond yields (i.e. mortgage rates) fall.

On the other side, inflation is ramping up.

Recent economic data shows that the economy is expanding, and the Federal Reserve is maintaining its accommodative growth policies. Therefore, this week, the key economic event will be Friday’s jobs report. if job creation is high, expect inflation fear to re-ignite, and mortgage rates to rise.

Another risk factor for this week’s rate shoppers is that tensions begin to settle in the Middle East, or that Wall Street gets more comfortable with rising oil prices. If that happens, safe haven buying will subside and mortgage rates will resume rising.

There appears to be more reasons for mortgage rates to rise this week than for them to fall. Plan accordingly.

If you have not locked a mortgage rate yet, this week may represent your last chance to get a low one. Talk to your loan officer and make a plan.

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What’s Ahead For Mortgage Rates This Week : February 22, 2011

Safe Haven Buying Mortgage markets improved slightly last week, rebounding from the worst 1-week loss in recent history. The gains were geopolitical, however; the result of instability in the Middle East region. Economic data was overlooked as investors made a broad-based flight-to-quality.

For just the second time in 2011, conforming mortgage rates in Providence fell on a week-to-week basis.

Rates shouldn’t have dropped, though. Here’s just a sampling of last week’s economic data, all of which can be tied to rising mortgage rates:

Furthermore, the just-released January FOMC Minutes showed an improving economic outlook from members of the Federal Reserve.

Therefore, home buyers and rate shoppers might consider last week’s rate drop a gift. Without the growing unrest in Libya, Egypt and Tunisia, mortgage rates would have moved considerably higher.

Instead, rates fell in a bout of what’s commonly known as “safe haven” buying.

In safe haven buying, global investors shun risk in favor of safer investments; usually in response to market uncertainty. Terror threats is one such event. Regime overthrow is another. Because the event’s long-term effect on markets is unknown, investors choose to move cash to safer asset classes until the future is more clear.

The extra demand for such assets drives prices up and, in the case of mortgage markets, drives rates down.

Last week, rates fell because safe haven buying was so strong. That may not be the case this week. As events play out across the globe, mortgage rates at home in Rhode Island will be affected.

There’s a lot of economic data set for release this week, including a large series of housing-related figures. Stronger-than-expected data should cause mortgage rates to rise, safe haven buying notwithstanding.

If you’re still shopping for rates, or looking for a last chance to lock a low rate, now may be your best chance. Talk to your loan officer about a rate-locking strategy early in the week. As the situations abroad become more clear, mortgage rates should start to climb once again.

No Comments by Jesse Kenner on February 22, 2011
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What’s Ahead For Mortgage Rates This Week : February 14, 2011

Housing Starts through Nov 2010Mortgage markets worsened terribly last week. Amid more reports of an improving economy and fears of pending inflation, mortgage rates skyrocketed to their highest levels since April 2010. 

According to Freddie Mac, mortgage rates made their largest 1-week jump in more than a year last week, tacking on 0.24 percent and bringing the average national 30-year fixed mortgage rate up to 5.05%.

In some markets, rates are even higher.

Since bottoming out in Freddie Mac’s November 11 survey, conforming, 30-year fixed mortgage rates are now higher by close to a full percentage point. Home buyers in Providence and across the nation have lost more than 10% of their purchasing power during that time.

Rates have also been on a historic run higher, increasing over 9 consecutive days for the first time in almost a decade. That streak ended Friday with rates dropping slightly, and rate shoppers are hopeful the momentum lower continues into this week.

It’s not likely. The week is loaded of housing data and housing has been trending better. More strong figures will bolster stock markets at the expense of bonds, driving mortgage rates higher for the 4th week in a row.

In addition, inflation-related figures will be released. That, too, can have a negative impact on mortgage rates.

  • Monday : NAHB Homebuilder Confidence Survey
  • Tuesday : Retail Sales, Consumer Confidence
  • Wednesday : Building Permits, Housing Starts, Producer Price Index, FOMC Minutes
  • Thursday : Consumer Price Index

Markets should increase in volatility as the week progresses because of the looming 3-day weekend. Volume will be light Friday in advance of President’s Day.

If you haven’t yet locked your mortgage rate, the time to act is soon — possibly now. Mortgage rates are well off their historical lows, but still relatively inexpensive. Before long, that may no longer be the case.

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What’s Ahead For Mortgage Rates This Week : February 7, 2011

Unemployment Rate (2009-2011)Mortgage markets worsened last week as Wall Street came to terms with the expanding economy; and realized the Federal Reserve may be trying to induce inflation.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in Rhode Island rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke’s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt’s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.

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What’s Ahead For Mortgage Rates This Week : January 31, 2011

Jobs in focus this weekMortgage markets improved this week as positive economic data was overshadowed by geopolitical strife. A flight-to-quality drove buy-side activity in mortgage bond markets, which, in turn, helped conforming rates fall across the state of Rhode Island.

Last week marks the first time this year that mortgage rates fell on a week-over-week basis, and considering why rates fell, it points to the fragile nature of the global economy.

By all accounts, last week showed that the U.S. economy is in recovery.

  1. Housing data rises to its best levels in 8 months (LA Times)
  2. Consumer sentiment hit a 7-month high (NPR)
  3. Business investment increased 1.4% in December

Furthermore, the Federal Open Market Committee met last week and said that the economy continues to expand (although the pace is slower-than-optimal).

Normally, positive news like this would drive mortgage rates higher, and during the early part of the week, it did. But then, as political problems in Egypt grew larger, international investors began to shift money from their risky assets into the relative safety of the U.S. bond market.

This includes mortgage-backed bonds, of course. The buyer influx pushed up prices and, because bond yields move opposite price, mortgage rates dropped.

The week ended with rates at their lowest levels of the week.

Next week, though, rates could reverse. There’s two developing stories rate shoppers should watch.

The first is related to Egypt. In addition to buying mortgage-backed bonds, investors are gambling that oil prices will rise, too. Egypt is the world’s 21st largest oil producer and a disruption of its supply could send gas prices soaring. This circumstance would be inflationary and inflation is the enemy of mortgage bonds.

Crude oil jumped 4.3% Friday afternoon. If that continues, mortgage rates should start rising.

The second is tied to jobs. Last month’s jobs data was weaker-than-expected on Wall Street and it sparked a mini-rally in mortgage rates to start the year. Jobs are paramount to economic recovery so if this month’s figures are lower than the consensus figure of 150,000, expect mortgage rates in Providence to fall.  If the number is stronger than 150,000, expect mortgage rates to rise.

The jobs report is released Friday at 8:30 AM ET.

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What’s Ahead For Mortgage Rates This Week : January 18, 2011

Home sales tied to mortgage ratesMortgage markets worsened last week on a turn-around in sentiment across the Eurozone. The sort of “safe haven” buying that had buoyed mortgage bonds since the New Year dissipated, and mortgage rates resumed climbing.

Last week marked the first week since the end of 2010 that mortgage rates have risen, breaking a 2-and-a-half-week rally.

Conforming and FHA mortgages in Rhode Island increased in rate by roughly 1/8 percent.

Last week was data-sparse so mortgage markets took their cues from Europe — specifically Portugal and Spain. There have been lingering concerns that the two countries might default on their respective national debts. The development has a similar feel to what transpired in Greece in April of last year, and that may be why markets are reacting in much the same manner.

At the beginning the year, the fear of default in Portugal and Spain was elevated. It drove money managers away from risky assets and toward safer ones, including U.S. mortgage bonds. Last week, however, those fears eased. Money reversed flow and, as a result, mortgage rates rose. 

Truly, this is a global market.

This week, the Eurozone story continues, but there is a lot of U.S. housing data due for release, too.

  • Tuesday : National Association of Homebuilders Housing Market Index
  • Wednesday : Building Permits, Housing Starts
  • Thursday : Existing Home Sales

Housing is considered key to the country’s economic recovery, so strength in this week’s housing should lead stock markets higher on better expectation for the economy which would, in turn, cause a sell-off in mortgage bonds, driving mortgage rates higher.

Mortgage rates are decidedly higher than their lows of 2010, but have much more room to rise. If you haven’t locked your mortgage rate yet, consider taking care of it this week.

Rates have farther to rise than to fall in the medium-term.

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What’s Ahead For Mortgage Rates This Week : January 10, 2011

Unemployment Rate (2008 - 2010)Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers. Demand for mortgage-backed bonds outweighed supply and conforming and FHA mortgage rates edged lower.

Last week marked the second straight week that mortgage rates fell in and around Rhode Island. Rates had risen over the previous 7 weeks.

According to Freddie Mac’s weekly mortgage rate survey, the national average rate for a 30-year fixed rate mortgage is 4.77 percent with an accompanying 0.8 points required.

This week, with no new data due for release, look for last week’s two biggest stories — jobs and debt — to carry forward. The first such story relates to jobs.

Friday, the Bureau of Labor Statistics released its monthly Non-Farm Payrolls report. Consensus estimates were for 150,000 net new jobs created December, with “whisper numbers” pegging the number as high as 250,000. Mortgage rates increased on the chance that the rumors were right. 

It turned out, they were not.

Accounting for revisions to past months’ data, December’s jobs data was in-line with expectations, resulting in a mortgage rate retreat that lasted all day Friday. That momentum should carry forward into the early part of this week.

The second story is tied to safe-haven buying.

The U.S. mortgage market benefited from growing concerns within the Eurozone that Portugal could default on its debt. The story emerged three weeks ago when Portugal’s debt was downgraded. It picked up steam last week after a weak debt offering. It’s a similar beginning to what transpired in Greece last spring.

Mindful of their respective risk, worldwide investors chose to shift risk toward safer asset classes which includes, of couse, mortgage-backed bonds. This week, those risks will remain and the flight to quality assets should continue. Mortgage rates will benefit.

Given the likelihood that mortgage rates will fall this week, it may be tempting to let your mortgage rate float. That strategy could prove foolish.

Mortgage rates fell to historic lows in 2010 and sprung higher at the first possible opportunity. Rates remain at ultra-low levels and have lots of room to rise. This week, consider buying on the dip. It may be the last chance you get.

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What’s Ahead For Mortgage Rates This Week : January 3, 2011

Jobs in focus this weekMortgage markets improved last week during a snow- and holiday-thinned series of sessions on Wall Street. Mortgage bonds improved on year-end profit-taking, mostly, leading conforming mortgage rates in Rhode Island lower.

Last week marked the first calendar week in which mortgage rates dropped since early-November, a pleasing development for rate shoppers and home buyers. Falling rates means lower monthly mortgage payments.

But don’t expect for rates to improve again this week, however. Last week’s gains were the result of extremely low trading volume and a close-out of 2010 mortgage bond positions. With markets re-opened for 2011, and Wall Street back at full volume, mortgage rates may resume rising.

There will be a lot of data and information on which for mortgage bonds to trade, too.

The week starts with a growth report from the U.S. manufacturing sector. The Institute for Supply Management’s monthly report has shown improvement over 16 straight months, and Monday’s report is expected to show the same. Because manufacturing is key in U.S. economy, a stronger-than-expected value could send stock markets higher, and mortgage rates, too.

Then, Tuesday, the Federal Reserve releases the minutes from its December meeting. There won’t be policy changes transcribed in the minutes, but Wall Street will scrutinize its pages for clues on the economy. A bullish bias from the Fed will push rates higher. A bearish bias will drag rates lower.

And lastly, Friday, the government will release its Non-Farm Payrolls report for December. This is a major market-mover because of how closely jobs are tied to the economy overall. Plus, Fed Chairman Ben Bernanke speaks Friday — another risk to mortgage rates.

The gravity of this week’s economic releases and speeches should make shopping for a mortgage difficult. Stay in close touch with your loan officer about mortgage rates and how they’re moving. And if you see a rate you like, lock it.

There’s no promise rates will ever go lower.

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What’s Ahead For Mortgage Rates This Week : December 27, 2010

Existing Home Sales (Nov 2009 - Nov 2010)Mortgage markets worsened again last week as the holiday-shortened sessions did little to buck recent momentum. Although Freddie Mac reported mortgage rates dropping 0.02% from the week prior, loan officers on the street will report the opposite. Rates did not fall last week.

Conforming mortgage rates moved higher for 7th straight week.

For rate shoppers and home buyers, it’s been a harrowing two months.  

Since the Federal Reserve announced its QE2 program November 3, 2010, mortgage rates have moved from all-time lows to 7-month highs. Mortgage payments now cost $38 more per month per $100,000 borrowed as compared to the day before the stimulus was announced.

Mortgage rates look poised to increase again. Here’s why.

A major reason why mortgage rates were so low, for so long, was that the U.S. economy was suffering. Consumer spending was slow, business forecasts were dour, and job growth was negative. These conditions lasted for longer than a year.

Lately, however, the conditions are changing:

  • Consumer spending is up 5 months in a row (Bloomberg)
  • Fannie Mae is boosting its economic outlook for 2011 (WSJ)
  • Job growth is slow, but positive (Reuters)

And, furthermore, housing appears to be on solid ground. Existing Home Sales and New Home Sales improved last month, and home supplies are dropping. This, too, is good for the economy, which, in turn, is bad for mortgage rates.

This week, don’t be surprised is mortgage rates rise again. The week is again shortened by holiday and there’s a host of new data that may signal economic improvement including Pending Home Sales, consumer confidence surveys and the Case-Shiller Index.

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What’s Ahead For Mortgage Rates This Week : December 20, 2010

Fed Funds Rate vs Mortgage Rates (2000-2010)Mortgage markets worsened again last week as belief in a U.S. recovery and concerns for inflation took hold on Wall Street.  Conforming mortgage rates rose for the 6th straight week.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage is 0.66% higher this week as compared to rates on November 11, but loan originators will tell you that figure is understated.

Real mortgage rates — mortgage rates available to everyday homeowners and buyers are up by as much as a full percentage point since November, and loan costs are rising, too.

The Refi Boom of 2010 is over.

Last week, mortgage markets revolved around the Federal Open Market Committee. The FOMC met Tuesday and voted to leave the Fed Funds Rate unchanged within a target range of 0.000-0.250. This was expected. However, markets seemed to be surprised by the Fed’s take on inflation.

In its press release, the Fed said inflation is running too low to benefit the economy. Its policies, including the group’s $600 billion bond market program, may be meant to spark inflation, then. This would lead mortgage rates higher and Wall Street knows it.

Mortgage rates spiked after the Fed adjourned.

This week, with a sparse data schedule and trade volume thinning because of holidays, expect mortgage rates to be volatile.

Although rates are higher since 7 weeks ago, they remain low, historically. There’s still a chance to capitalize on the lowest mortgage rates in decades. If you haven’t refinanced this year and want to know what’s available, talk to your loan officer right away.

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