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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.
Wednesday’s bond market opened up sharply due to overseas concerns, particularly from Greece as violence erupted in protest of their financial crisis. The stock markets have reacted negatively to the news as investors seek safety in bonds. The Dow is currently down 137 points while the Nasdaq has lost 31 points. The bond market is currently up 28/32, erasing all of yesterday’s late selling, but we still should see an increase in this morning’s rates of approximately .250 of a discount point if comparing to yesterday’s morning pricing.
The Labor Department gave us this morning’s key economic data with the release of May's Consumer Price Index (CPI). They said early this morning that the overall CPI rose 0.2% while the more important core reading rose 0.3%. Both readings were higher than what analysts had expected, clearly making this negative news for the bond market and mortgage rates. However, it appears that the international news is taking center stage for the time being.
May's Industrial Production data was also posted this morning, revealing a 0.1% increase in output at U.S. factories, mines and utilities. This was slightly weaker than expected, but this data has had no influence on this morning’s rates due to the significance of other current events.
Tomorrow’s economic data is not considered to be nearly as important as yesterday’s and today’s releases were. The first is May's Housing Starts that tracks starts of new home projects. It is the week's least important monthly report and likely will not affect mortgage rates unless its results vary greatly from forecasts. It is expected to show that starts of new homes rose last month, indicating some strength in the housing sector. That is basically bad news for the bond market and mortgage rates because a weak housing sector makes a broader economic recovery less likely. However, this data is not important enough to cause a noticeable change in mortgage rates.
The Labor Department will post last week’s unemployment figures early tomorrow morning. They are expected to announce that 421,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week, indicating a slightly improving labor market and making it bad news for bonds. The bond market tends to thrive in weaker economic conditions, so the larger the number of new claims filed the better the news for the bond market and mortgage pricing.
Yesterday’s bond sell-off gained momentum into afternoon trading, pushing the yield on the benchmark 10-year Treasury Note well above 3.00% (3.09%). Before this morning’s news, I was fairly convinced that 3.00% was more of a floor than anything else, meaning that it will take some significant news for it to fall and remain below that level for any length of time. Since bond prices and yields move in opposite directions and mortgage rates follow yields, this should be concerning to mortgage shoppers. But today’s events seem to create more confusion. Whenever we see flight to safety in bonds, it more times than not is only a temporary gain. It will be interesting to see what happens over the next couple of days as today’s gains can easily be erased with positive news from Greece. Therefore, we should proceed cautiously is still floating an interest rate, at least for the immediate future.
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 Departments and our loans are arranged through third party providers
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