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The Daily Mortgage Interest Rate Lock Advisory - June 25, 2009

By
Real Estate Agent with Better Living Real Estate, LLC 9152684


What the Mortgage Backed Securities Market is Doing Today:

The FNMA 30 Year 5.0% Coupon opened this morning up 3/32 from yesterday's close to 101.39 on worse than expected jobless claims.

The price of the FNMA 30-Year 5.0% coupon closed down 1/32 from its opening yesterday to 101.30 (as shown by the white line). MBS is currently trading up 12/32 to 101.67 (as shown by the blue line). Remember, on mortgage backed securities (MBSs), as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be 0.125% - 0.25% better in price today as compared to yesterday.

Economic Reports Being Released Today:

  • Final Reading to the 1st Quarter GDP - The final reading revealed an annualized 5.5% decline in GDP, and is largely as expected - economists predicted the final reading would show a 5.7% decline. The GDP data is quite aged now (covers January through March) and will likely have little impact on today's bond market or mortgage pricing.

  • Jobless Claims - There were 627,000 new claims filed for unemployment last week, more that the 613,000 new claims analysts predicted. This is the second straight week that unemployment rose. Continuing claims for unemployment rose to 6.738 million. This indicates that it's taking more time for the jobless to find work, and some are either finding work or have exhausted their unemployment benefits. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is generally considered not to be of high importance to the bond or the mortgage backed securities markets.

  • Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $576 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Important News of the Day:

Demand for $37 billion in the 5-Year note came in fairly strong yesterday. The bid-to-cover ration, at 2.5, was stronger than the past few 5-Year note auctions, but had minimal impact on mortgage rates. The Feds will be auctioning the 7-Year note today. If today's auction is met with a strong demand, bond prices could and mortgage rates fall during afternoon trading hours. But, if the auctions are met with lackluster demand, bond prices may fall and mortgage rates will rise in afternoon trading.

There are a number of economic reports scheduled for release this week that may influence mortgage pricing. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch at www.LewCorcoran.com/MyBlog.

What Happening With Mortgage Rates Today:

High Volatility. Overall, the busiest day for bonds and mortgage rates for the remainder of the week is today with the government's auction of the 7-Year note. There is a pretty good possibility of seeing mortgage rates changing this afternoon, so please proceed cautiously if you're still floating an interest rate and maintain contact with your mortgage professional.

In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making more sense in the short term right now as the markets recover from the dramatic sell off the last couple of weeks, but the ever increasing massive government debt and fears of inflationary pressures could soon drive rates up again. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in. Otherwise keep an eye on the markets and maintain contact with your mortgage professional. The markets can change at any moment.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

  • Float if my closing was taking place within 7 days
  • Float if my closing was taking place within 8 and 30 days
  • Float if my closing was taking place between 31 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 any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

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Lew Corcoran
Licensed Massachusetts Real Estate Agent
Accredited Home Staging Professional
Professional Real Estate Photographer
FAA Licensed Drone Pilot

Director, National Board of Directors,
Real Estate Staging Association (RESA)

Better Living Real Estate, LLC
15 Wall Street, #9157
Foxborough, MA 02035
O: (888) 877-8300
D: (508) 258-9658

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