Posts Tagged ‘ Interest Rate Related News ’

Conforming mortgage rates rose by 0.625 percent Wednesday. Yes, you read it right. Zero-point-six-two-five percent.

The surprise surge in pricing started shortly after 1:00 P.M. ET, then continued all the way until the market’s closing. It was the sharpest one-day surge in mortgage rates in recent history. Perhaps ever.

For mortgage rate shoppers swept up in the surge, monthly payments are now higher by $29 per $100,000 borrowed.

That’s a significant shift.

For as rare as Wednesday’s events were, though, middle-of-the-day, 0.625 percent rate changes don’t just happen. Yesterday, the action was the result of a confluence of factors, including:

• Rising oil prices and gas prices
• Optimistic predictions about the end of the recession
• Concerns over the U.S. total debt load
• Fears of inflation

In addition, momentum trading played a role.

As markets worsened, selling begat more selling, amplifying Wall Street’s total losses. As mortgage bond prices fell, mortgage rates went up. By a lot.

Mortgage markets are notoriously fickle and yesterday’s events proved it. Days like Wednesday are precisely why insiders recommend shopping for mortgage rates in a compressed timeframe. The faster you finish, the lower the risk of losing low interest rates to new market conditions.

Mortgage markets reacted poorly to not-as-strong-as-expected housing data and employment data last week causing mortgage rates to rise on the week overall.

It was the third time in 4 weeks that mortgage rates were up.

To the detriment of rate shoppers, mortgage rates were especially volatile Thursday and Friday.

As an increasing number of traders punched out ahead of the 3-day weekend, the mortgage pricing swings grew wider and wider. Rates were at their lowest last week on Wednesday morning. By Friday, some mortgage rates were higher by as much as 3/8 percent.

This week, with traders coming back to work, the pace of change should slow a bit, if not for the volume of closely-watched data expected to be released.

The data with the largest potential impact on mortgage rates this week is related to the housing market. There will be 3 separate reports — each expected to show that housing is still weak, but not as weak as it was.

• Tuesday: Case-Shiller Price Index
• Wednesday: Existing Home Sales
• Thursday: New Home Sales

However, because real estate is local in nature and these reports are broadly national, it’s important to not read into them too much. They’re good for an overview but shouldn’t be used as the basis for an offering price.

In addition, there will be two consumer confidence surveys released — one on Tuesday and one on Friday.

Consumer surveys can be important in a recovering economy because as confidence rises, spending often does, too, and consumer spending represents two-thirds of the U.S. economic engine. If confidence is rising, expect the stock market to benefit and the mortgage bond market to suffer.

This would lead mortgage rates higher.

It’s unlikely that mortgage markets will display the same volatility this week as compared to last week, but that doesn’t mean that mortgage rates won’t change. With so much data crossing the wires in the next 4 days, it’s likely that Friday’s rates will be different from today’s.

Therefore, if you’ve found a rate and payment with which you can be comfortable, consider locking it in. It’s unlikely to last long.

Rates go up, rates go down. Catch them while you can.

After Wednesday’s mortgage market rally drove rates down by a bunch, Thursday’s sell-off pushed them right back up.

This has been a common pattern in the skittish world of mortgage rates this year.

With the U.S. economy still teetering between recession and growth, markets are looking for signals anywhere it can find them. Thursday’s clue came from a government report showing that more Americans are collecting unemployment benefits than at any point in history.

Strangely, mortgage rates rose on the news.

We call it “strange” because weak economic data has tended to draw mortgage rates lower lately to the benefit of prospective home buyers and would-be refinancers. Lower rates make homes more affordable.

Thursday, though, the pattern broke.

The main reason why mortgage rates rose Thursday isn’t because of the employment report or any other piece of data. Rates rose Thursday for the same reason that they had dropped the day prior — the Federal Reserve.

On Wednesday, the released minutes from the Fed’s last meeting suggested that the group might make a larger mortgage market intervention. On Thursday, in the face of worsening jobs data, markets bet the Fed wouldn’t.

Mortgage rate shoppers, unfortunately, got caught in the crosshairs.

Rates can — and do — change quickly, without warning. And, thus far this year, the changes have been extra sudden. This is one reason why it’s often prudent to lock a mortgage rate as soon as you find one that’s agreeable. Wait too long, and it could be gone.

Expect more volatility today with traders leaving early for Memorial Day Weekend. Less volume means more chances for rates to change.

After a dreadful start to the month of May, mortgage markets improved last week, pushing mortgage rates lower overall.

It was the first week since late-April in which mortgage rates fell.

The biggest reason rates improved last week was because the economic optimism that was responsible for the stock market’s 30% gain since March faded somewhat.

Retail Sales came in weaker-than-expected as did Initial Jobless claims. Both of these data points show that the economy may not be recovering as quickly as investors had wanted to believe.

Combined with gas prices ballooning more than 10 percent over the last 3 weeks, it’s clear that consumer spending will be muted this summer and into fall.

Consumer spending is important because it accounts for two-third of the economy. If it’s slowed for any reason, the economy is less likely to emerge from the current recession as quickly as had been anticipated.

This is good news for mortgage rates because a slow economy tends to draw investors out of stocks and into bonds, including the mortgage-backed kind. More mortgage bond demand leads to higher bond prices and, therefore, lower bond yields and mortgage rates.

This week, there isn’t much data to watch and, because of Memorial Day, trading will be very light towards Thursday and Friday.

It’s during “calm” weeks like this that mortgage rates can make huge movements up or down. With no official announcements against which traders can make bets, every piece of news is a surprise.

If you’re still floating a mortgage rate, take some risk off the table by locking in this week.

After a series of increases starting April 30, mortgage rates finally took a dip Monday. It was a welcome surprise for home buyers that went under contract over the weekend.

Same for homeowners looking to pull the refinance trigger.

Versus mortgage rates on Friday afternoon, many lenders were already showing lower rates Monday morning before a late-afternoon rate sheet reprice even lower.

The drop in rates lowered annual mortgage payments by roughly $180 per $100,000 borrowed.

Rate dips like this aren’t expected, of course, bringing us to the one of the most important axioms of shopping for a mortgage rate: You can’t shop for good luck. This is because mortgage rates are inherently unpredictable.

• On some days, rates are higher
• On some days, rates are lower
• On some days, rates are unchanged

Occasionally, there are days when rates are all three.

Monday’s rate dip, though — while sharp — may not last. Early this morning, markets were pressuring mortgage rates to rise and lenders are often quick to pass rate hikes on to consumers.

With a little bit of luck, you’ll get your rate locked in before changes for the worse.

For the third week in a row, mortgage markets improved early in the week, only to give back the gains before Friday’s close.

Mortgage rates ended last week exactly where they started. However, if you locked your mortgage rate Tuesday, you got a rate decidedly lower than someone who waited until Friday.

Last week, one of the biggest mortgage rate drivers was a series of surprisingly strong corporate earning reports, including those from financial firms Goldman Sachs and Citigroup.

The positive reports pushed the Dow Jones Industrial Average to its 6th consecutive weekly gain. This is the market’s longest winning streak in two years and its best 6-week rally since 1938, in percentage terms.

In part, the rally is boosting Consumer Sentiment, too. According to a survey, Americans are feeling better about the economy than at any time since last September’s meltdown.

But while stock market rallies and rising consumer sentiment can be good for our investment portfolios, they’re not always welcome when we’re shopping for mortgage rates. This is because the bond market is considered a “safe place” for money, an alternative for when stock markets are risky.

When market risk is reduced like, say, following 6 consecutive weeks of gains, the safe haven of bonds loses some of its importance to investors.

As a result, bonds start to sell-off so more cash is available to invest in equities. Bond prices suffer when this happens and, because mortgage rates are based on the price of mortgage bonds, mortgage rates suffer, too.

This week, there are a number of large corporations reporting first quarter earnings including banking behemoths Bank of America and US Bank, plus companies like IBM, AT&T and McDonald’s. Strong earnings may — again — lead mortgage rates higher.

If you’re among the thousands of Americans still waiting for mortgage rates to “bottom out”, consider that the bottom may have already been touched.

It’s tough to follow mortgage rates in real-time so, at least in the short-term, you can find some clues in the stock market. If stock markets are rising this week, it’s likely mortgage rates are, too.

For the second week in a row, mortgage markets started the week strong and then ended with a fizzle. In the holiday-shortened week, rates were exactly flat overall.

There wasn’t much economic data to move rates last week, incidentally. The market’s up-and-down action was largely based on two events:

1. A reputable analyst said banking-sector optimism may be premature
2. Wells Fargo reported a record $3 billion in first quarter earnings

It was the first item that dropped rates Monday and Tuesday; the second item, in part, led them back up.

This week, data returns.

Tuesday, we’ll get a look at Retail Sales. Because consumer spending accounts for two-thirds of the economy, a lower-than-expected figure for Retail Sales would dampen Wall Street’s current optimism for the U.S. and that would likely lead mortgage rates lower.

Next, on Wednesday, the government will release a closely-watched “cost of living” measurement called the Consumer Price Index. At its roots, CPI is an inflation gauge for the economy so — because inflation is bad for mortgage rates — a higher-than-expected CPI number is expected to push mortgage rates higher.

Then, on Thursday, Housing Starts is released.

Housing Starts measures the number of new homes on which the nation’s builders broke ground last month. If starts are up, it may mean that builders are optimistic for housing — a good sign for the economy. However, if starts are down, it should help reduce housing inventory over the next few months — also a good sign for the economy.

Meanwhile, 3 of the country’s biggest financial firms — Goldman Sachs, JPMorgan Chase, and Citigroup– are due to release first quarter earnings this week. If the filings show strength like Wells Fargo’s did, expect mortgage rates to rise like that did after the Wells Fargo report. What’s good for stocks right now may prove to be bad for mortgage rates.

Goldman Sachs reports on Tuesday, JPMorgan Chase on Thursday and Citigroup on Friday.

When conforming mortgages adjust, they’re often tied to an interest rate index called LIBOR.

LIBOR is an acronym for London Interbank Offered Rate. But what LIBOR stands for isn’t as important as the role it plays.

LIBOR is an interest rate at which banks borrow money from each other. Therefore, when banks feel the banking system as a whole is unsafe, LIBOR rises to compensate.

It’s why LIBOR spiked last October after Lehman Brothers failed. Financial institutions wondered what other institutions would fail and that added risk to the system.

Since October, however, and because of massive government interventions worldwide, LIBOR has been on a steady retreat. Moreover, with close to $30 billion in conforming mortgages scheduled to adjust by Labor Day, the timing couldn’t be better for homeowners with conforming ARMs.

Typically, a Fannie Mae- or Freddie Mac-backed mortgage adjusts once annually. The adjusted interest rate is always equal to some constant — usually 2.250 percent — plus the rate of LIBOR on the date of adjustment.

As a math formula, the ARM formula might like this:

New Mortgage Rate = LIBOR + 2.250 percent

In October, when LIBOR was above 4 percent, a homeowner’s ARM may have adjusted to 6 1/2 percent. Today, that same ARM would move to four-and-a-quarter.

As a strategy play, it might make sense to let your ARM adjust because the rate will remain low, but with fixed rate mortgages hovering near 5 percent, locking up a long-term rate may be smart, too.

Talk to your loan officer to review all of your choices.

Mortgage markets were up-and-down last week as rates fell Monday and Tuesday before surging higher from Wednesday through Friday.

In some case, after touching all-time lows, conforming mortgage rates added a half-percent in the second half of the week, ruining some homeowners’ chance to refinance.

It was the second week in a row that mortgage rates worsened.

One reason why mortgage rates are up is because investors are turning bullish on the economy, even as it sputters.

From investors’ perspective, the data is weak, but not as weak as it has been — or could have been. It’s a glass-is-half-full approach and it’s the opposite of how Wall Street worked in 2008.

For example, from last week:

1. Consumer Confidence measured a paltry 26.0 — but the reading was up from February’s all-time lows
2. The Case-Shiller Index showed a big drop in home prices — but the report ignores strong housing data from the last 60 days
3. Unemployment rates reached 8.5 percent nationally — but employment is a lagging indicator for the economy

In time, we’ll learn whether investors were on-time or premature in their bets for an economic turnaround but, for now, the mere belief that the economy is improving is leading mortgage rates higher. And until Wall Street’s sentiment changes, rates should continue in that direction.

This week, there won’t be much chance to change traders’ minds. For one, it’s a holiday-shortened week. Secondly, there’s just one release of importance to markets — Wednesday’s release of the March Fed Minutes.

Mortgage rates may not rise for the third week in a row this week but long-term momentum is working against rate shoppers. If you see a rate you like, consider locking it. Before long, it might be gone.

The stock markets made strong gains last week but the mortgage markets barely moved in the wake of the Treasury’s “toxic asset” plan.

After carving out wide trading ranges on most days, mortgage pricing ended the week slightly worse overall.

From an economic standpoint, though, last week was an interesting one.

• Existing home sales showed unexpected strength
• New home sales showed unexpected strength
• Data showed home prices rising unexpectedly

In addition, consumer confidence rose unexpectedly, too.

To rate shoppers, these “unexpected” developments are warnings worth heeding because mortgages trade on expectations of the future. And “the future”, you’ll remember was widely expected to be an economic abyss.

This is one of the many reasons why mortgage rates are so low right now — during uncertain times, investors flock to safe investments. But when those expectations change, mortgage rates usually do, too.

And quickly.

Our current recession has been thus far called “housing-led” and was predicted to last several years. Last week’s data, however, provides at least some evidence that the recession may be ending; that the economy may find its way forward sooner rather than later.

Indeed, even members of the Federal Reserve now call for a turnaround starting in as few as 6 months.

For now, market reaction to the unexpected data has been tepid. Therefore, watch for developments over the coming weeks and — perhaps more importantly — keep an eye on the investor mindset. If bond markets start to sell-off en masse, don’t be surprised if mortgage rates race higher by quarter-point leaps at a time.

Meanwhile, this week, the biggest data release is Friday’s jobs report. It’s expected to show unemployment reaching to 8.5% with another 656,000 Americans losing their jobs in March. As before, if the data isn’t as bad as expected, watch for stocks to rise and mortgage rates to go with them.