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If you are considering locking in an interest rate for a New York mortgage or a Florida mortgage, read this post.
Thursday’s bond market opened in negative territory despite mostly weaker than expected economic data. The stock markets are mixed but relatively calm with the Dow up 7 points and the Nasdaq down 7 points. The bond market is currently down 6/32, which will likely push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point. Part of that increase is a result of weakness in bonds late yesterday.
Two of this morning’s three reports gave us favorable results. The Labor Department reported that new claims for unemployment benefits fell last week to 409,000. This was below forecasts of 420,000, meaning that the employment sector was stronger than thought last week. That makes this report the negative one as it indicates economic strength.
April’s Existing Home Sales report was the second piece of data. The National Association of Realtors announced that home resales fell 0.8% last month, falling short of expectations. That can be considered good news for the bond market because analysts were expecting an increase in sales. Since it will be more difficult for the broader economy to gain strength with a weak housing sector, these results are favorable for the bond market and mortgage rates.
The third report of the day and final release of the week was April's Leading Economic Indicators (LEI) late this morning. The Conference Board said the index fell 0.3%, meaning that it is predicting slower economic activity over the next three to six months. Since this data is not exactly a factual report, its impact on the financial and mortgage markets is usually not significant. However, it does point towards a slowing economy rather rapid growth, so it should be considered good news for mortgage rates also.
Yesterday’s afternoon release of the minutes from the last FOMC meeting gave us a couple of helpful tidbits. The most significant was that the Fed is starting the planning stages of unwinding their holdings and stimulus moves made to boost and support the economy during its most difficult times. It is evident in the minutes that the Fed prefers to raise key short-term interest rates before slowly selling asset holdings such as mortgage-related bonds. However, it will likely not start in the immediate future. This helps the market prepare and somewhat establishes a chronological order or what will take place once they start to raise short-term rates. I didn’t see anything that should draw much concern, but it was made pretty clear that selling their mortgage securities before government debt was in the plan. The additional supply of mortgage debt could hurt mortgage rates, but this is an event that will happen somewhere well down the road and will be at a slow, gradual, multi-year pace, so its impact on mortgage rates at that time may not be as bad as it sounds.
There is nothing of importance scheduled for release tomorrow, so look for the stock markets to be the likely cause of any sizable changes to bond prices and mortgage pricing. With little to end the recent negative tone in bonds, we may see further pressure in mortgage rates.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Empire Home Mortgage Inc. is a registered Mortgage Broker with the NYS and Florida Banking Depts and our loans are arranged through third party providers.