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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.
Today’s adjournment of the Fed’s two day FOMC meeting has yielded some interesting notes. During this meeting they kept key short-term interest rates at current levels, which was widely expected. They also decided to continue the Operation Twist program until the end of the year, extending it another 6 months, spending $267 billion more converting short-term debt proceeds into long-term debt purchases. As for the target date of keeping key rates at current levels, they simply renewed the previous statements of at least until late December 2014. And most important, there was no announcement on QE3 that the markets were expecting.
The 2:00 PM release of the Fed’s forecasts for the economy were indeed lower since their last predictions in April. Their forecasts for the GDP this year were lowered by a half of a percent. Previous estimates had the economy growing a pace between 2.4% and 2.9% this year, but now stand at 1.9% to 2.4%. They also raised their predictions on the unemployment rate. What was previously forecasted as an unemployment rate between 7.8% and 8.0% in the last quarter of this year is now expected to be between 8.0% and 8.2%. This means that they expect the economy to be in worse shape at the end of this year compared to what they thought back in April.
Fed Chairman Bernanke’s press conference didn’t really tell us anything drastic that the previous events of the day didn’t. He reiterated some of the earlier key points, including that Europe is a threat to our economic recovery. Generally speaking, the news was actually favorable for the bond market and mortgage rates.
The stock markets have moved into negative territory, with the Dow down 66 points and the Nasdaq down 8 points. The bond market initially fell further into negative ground but has since recovered part of that knee-jerk reaction. It currently stands down 6/32, but I would not be surprised to see a small upward revision to mortgage rates. Some lenders may opt to wait until tomorrow morning to reflect this change, so if your lender does not revise higher this afternoon, you are carrying an increase of approximately .125 of a discount point into tomorrow morning.
Tomorrow has two pieces of monthly economic data that we need to watch in addition to the regular weekly unemployment update. The Labor Department is expected to announce early tomorrow morning that 380,000 new claims for unemployment benefits were filed last week, down from the previous week’s total of 386,000. Because this data tracks only a single week’s worth of new claims, it usually takes a surprise spike or drop in claims for it to have a noticeable impact on mortgage rates. The larger the total of new claims, the better the news for mortgage rates since it would indicate employment sector weakness.
The second is May's Existing Home Sales report from the National Association of Realtors at 10:00 AM ET. This report tracks resales of existing homes, giving us a measurement of housing sector strength. It is considered to be moderately important to the markets, but can influence mortgage rates if it shows a sizable difference between forecasts and actual results. Analysts are currently expecting to see a decline in sales, pointing towards a weakening housing sector. That would be good news for the bond market and mortgage rates since a weaker housing sector makes overall economic growth more difficult.
May's Leading Economic Indicators (LEI) will also be posted at 10:00 AM tomorrow. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. Good news for mortgage rates would be a decline in this index, but it is expected to show no change from April’s reading, meaning it is predicting little economic growth over the next several months.
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 New York and Florida State Banking Departments and our loans are arranged through third party providers.
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