Mortgage Rate Forecast for June 23, 2010

Mortgage Rate Forecast for June 23, 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 4.0% MBS coupon opened at 100.69 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.0% MBS coupon was trading at 100.69 - the same as its opening.

It is customary in the MBS market to track the coupon that is running closest to par, which is 100.00. Due to market improvements, we are now tracking the FNMA 4.0% coupon. 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 the same 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 4.0% coupon over the past 30 days from 5-24-2010 to 6-23-2010:

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

• New Home Sales - fell 33% in May to an annualized rate of 300,000 homes - the lowest rate since 1963 - and is much less than expected. Analysts were expecting to see an annualized rate of 400,000 homes. In addition, the inventory of new homes on the market surged to an 8.5 month supply. The average price of new homes fell 1.0% to $200,900. It's clear that the extended home buyer tax credit helped to sell new homes in March and April. And, as expected, we saw a decrease in new home sales now that the homebuyer tax credit has expired. Normally, this data did not have much of an impact on the mortgage market this morning. However, this report is fairly significant and led to lower mortgage rates this morning.

In other news, the Treasury Dept. will be auctioning $38 billion in 5-Year Notes today. The Notes are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond market move higher (resulting in lower mortgage rates) during afternoon trading. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to a broader selling in bonds and mortgage backed securities. The selling of mortgage backed securities could result in higher mortgage rates.

The Federal Open Market Committee (FOMC) will adjourn this afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the 2:15 PM ET post-meeting statement. There appears to be more and more discussion about when the Fed will have to start raising key interest rates to prevent inflation from strengthening. If the statement gives any hint of when that may be, or there is a change in the regular canned portions of the statement, we could see a sizable change to mortgage rates Wednesday afternoon.

Trend in Mortgage Rates:

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

Mortgage Rate Lock Advice:

Mortgage rates continue to go lower. Yesterday, the price of the FNMA 30-Year 4.0% Coupon closed at 100.69. While it's still possible that mortgage rates could go even lower, it won't be by much. It's becoming increasingly unlikely as the European, Chinese and Japanese markets are showing signs of improvements. So, I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.