Trend and Forecast in Mortgage Rates on July 27, 2010 - Improving, or...?
Here are some of the events affecting mortgage rates today:
What Mortgage Backed Securities (MBS) Are Doing Today:
- The price of the FNMA 30-Year 4.0% MBS coupon opened at 101.81 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 101.72 - up 3/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be up to 0.125 points worse 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 6-27-2010 to 7-27-2010:
Economic Reports, News, and Events Affecting Mortgage Rates Today:
- Consumer Confidence Index (CCI) - consumer confidence for July fell 50.4, and is worse than the 51.0 reading that was expected. The weakness is attributed mostly to the lack of job prospects and income. The previous readings were 52.9 in May, 63.3 in May and 57.9 in April. 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. Because of the lower CCI readings, this report led to improved mortgage rates this morning.
In other news, the S&P Case-Shiller Home Price Index rose 1.2% in May, reflecting an increase in home price as homebuyers took advantage of tax incentives. On a year-on-year basis, home prices have increased an average 5.4% nationwide. The report shows that prices of homes are holding despite the end of tax incentives. However, it does not show that the housing market is in any type of recovery.
The Treasury Dept. will be auctioning $38 billion in 2-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.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past 3 years:
Mortgage Rate Forecast:
Mortgage rates are at their historic lows - they haven't been this low since the early 1950s. They could possibly go even lower as the global economic crisis continues. However, the stock market is over sold while the bond market is over bought. It also appears that banks in Europe are not as bad off as previously thought. Mortgage rates could head up soon as the markets begin to correct themselves. As such, I would not risk the chance waiting for lower mortgage rates.
If you're happy with the mortgage rate being offered to you today and if you don't want to risk mortgage rates moving higher, then you should apply and lock in now. It's better to have locked when you should have floated than it is to float when you should have locked.
Are you in need of a mortgage to purchase a home? Or want to refinance an existing mortgage into a lower permanent fixed rate? Or want to take cash out of the equity of your home? Or consolidate debt and reduce the monthly bills? Then be sure to request a mortgage rate quote today!