View Video "Happy Friday 4-11"
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Friday's bond market opened well in positive territory following early stock market losses and weaker than expected economic news. The stock markets are showing weakness after disappointing earnings news from GE that has fueled concern about the impact that the slowing economy is going to have on corporate earnings. The Dow is currently showing a 146 point loss while the Nasdaq has fallen 31 points. The bond market is currently up 22/32, however, we likely will see a slight increase in this morning's mortgage rates due to weakness in bonds late yesterday.
The only relevant economic data on tap today was the University of Michigan's Index of Consumer Sentiment. It revealed a reading of 63.2 that was well below forecasts and indicates that consumer sentiment about their own financial situations is still falling. This is good news for bonds and mortgage rates because waning confidence usually means consumers are less apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S economy, any signs of slowing spending eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive investors.
Next week is very busy in terms of relevant economic releases for the markets to digest. The week kicks off with Monday's release of March's Retail Sales data. This is a very important piece of data because it tracks consumer spending at retail level establishments. As with the consumer confidence related indexes, any data related to consumer spending is watched closely and can have a noticeable impact on bond trading and mortgage rates.
Monday's data is not the only important news of the week. We will also see two very important inflation related indexes the middle part of the week and a couple of less important reports as the week progresses.
If I were considering financing/refinancing a home,
Lock if my closing was taking place within 7 days,
Cautiously Float if my closing was taking place between 8 and 20 days,
Cautiously Float if my closing was taking place between 21 and 60 days,
Cautiously 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.
Fannie Mae has announced that in 2008 they will be implementing price overlays for all loan products with FICO's under 680 and LTVs > 70%, as well as loans with subordinate financing and 2 unit properties. These changes could literally pop up on the rate matrix anytime between now and then with no warning, so floating a rate, even if the bond market is down 20 basis points could prove to be very costly. Any borrower on the fence with a FICO 70%
FICO 680+ No adjustment
FICO 660 - 679 -0.750
FICO 640 - 659 -1.25
FICO 620 - 639 -1.75
FICO < 620 -2.00
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