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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.
Monday’s bond market is extending Friday’s rally with weaker than expected economic data posted and another round of stock losses helping to draw funds into bonds. The stock markets initially opened with gains due to an apparent resolution to the debt ceiling crisis a possibility. But after this morning’s economic data was posted, the current economic concerns took center stage and stocks went into selling mode. The Dow is currently down over 100 points while the Nasdaq has lost 26 points. The bond market initially opened flat but currently is up 17/32, which should improve this morning’s mortgage rates by approximately .500 of a discount point if compared to Friday’s morning pricing. The Institute for Supply Management (ISM) gave us this morning’s economic news with the release of their manufacturing index for July at 10:00 AM ET. They announced a reading of 50.9 that was well below expectations, meaning fewer surveyed executives felt business improved last month than the previous month. The biggest concern about the report is that the index fell very close to an important benchmark of 50.0. A reading below that level means more executives felt business worsened during the month than had felt it improved. That is a recessionary sign and gives a strong indication of manufacturing sector weakness. Both of which are good news for the bond market and mortgage rates.
Tomorrow’s important economic data is June's Personal Income and Outlays data at 8:30 AM ET. This report helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for an increase of 0.1% in income and spending. A larger than expected increase in income means consumers have more funds to spend, which is not favorable to bonds because consumer spending makes up two-thirds of the U.S. economy. Ideally, we would like to see declines in spending and income.
Overall, I am expecting to see another extremely active week for mortgage rates. We may see some pressure in bonds mid to late week ahead of Friday's employment numbers (assuming Washington puts the debt ceiling issue to bed today), but we also need to watch the stock markets for significant moves that can influence bond trading. I would not be surprised to see a rally in stocks if the debt issue does pass Congress and is signed by President Obama. By theory, this would be bad news for the bond market and could cause mortgage rate increases, but we are still in uncharted waters on this topic so we need to proceed cautiously. We are getting key economic data during a period of great uncertainty about our economy with a major national crisis climaxing at the same time.
If still floating an interest rate, I would definitely maintain constant contact with my mortgage professional. And hold on tight, it’s going to be quite an interesting week!
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... Float 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 New York and Florida State Banking Departments and our loans are arranged through third party providers.
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