Mortgage Rate Forecast for May 25, 2010

Mortgage Rate Forecast for May 25, 2010

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities Are Doing Today:

• The price of the FNMA 30-Year 4.5% MBS coupon opened at 102.08 this morning - up 1/32 from yesterday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 102.39 - up 10/32 from its opening.

Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and so do mortgage rates. I expect that mortgage rates will be up to 0.25 points better in price this morning as compared to yesterday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days from 4-25-2010 to 5-25-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• Consumer Confidence Index (CCI) - consumer confidence for May rose 5.4 points to 63.3 - better than the 57.9 reading that was expected. The reading was 57.9 in April, 52.5 in March, and 46.4 in February. Posted by the Conference Board, this measures consumer willingness to spend. As a comparison, a reading of 80 or better is considered a signal of economic health. Retail sales typically move in tandem with consumer optimism. Because consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market traders and can have a significant influence on the mortgage market. If consumers are less confident in their personal financial situations, they are less likely to make large purchases. Despite the higher CCI readings, this report had no impact on mortgage rates this morning because of the ongoing debt crisis in Europe.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Prices of mortgage backed securities are at their highs of 2010. Yesterday, the price of the FNMA 30-Year 4.5% Coupon closed within 63 basis points of its all-time high of 102.69 which was on November 30, 2009. This morning, the MBS coupon was within 35 basis points of that all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.50% with 1 point yesterday, and if price of the MBS 4.5% coupon were to go as high as 102.69, then the best the 30 year fixed mortgage rate would be is 4.50% with 0.375 point today.

If I were applying for a mortgage today, I would lock the rate as mortgage rates are already at their lows for 2010, and they're probably as low as they're going to go. While it's possible that mortgage rates could go even lower with the ongoing economic crisis in Europe, it won't be by much, and I would not risk the chance waiting for it.

Be sure to check out today's mortgage rates.