Mortgage Rate Forecast for May 3, 2010
Here are some of the events affecting mortgage rates today:
What Mortgage Backed Securities Are Doing Today:
- The price of the FNMA 30-Year 4.5% MBS coupon opened at 100.72 this morning - down 2/32 from Friday's close.
- At 9:30 AM, the 4.5% MBS coupon was trading at 100.62 - down 3/32 from its opening and down 5/32 from Friday's close.
Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be up to 0.250 points worse in price this morning as compared to Friday.
Price Trend in Mortgage Backed Securities:
The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days from 4-3-2010 to 5-3-2010:
Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:
- Personal Income and Outlays Report - there was a 0.3% increase in personal income in March. This follows a gain of 0.1% in February and a gain of 0.3% in January. Consumer spending increased by 0.6% in March as expected, and follows a 0.5% increase in February. The spending increase is attributed mostly to an increase in car sales. This report provides us with a measurement of the consumer's ability to spend and their current spending habits. Because consumer spending makes up two-thirds of the U.S. economy, any related data usually has an impact on the mortgage market and mortgage rates. This report had no impact on mortgage rates this morning.
- Institute for Supply Management's (ISM) Manufacturing Index - is up again in April with a reading of 60.4, a little less than the expected 61.0 reading. However, This is up 0.8 points from March's reading of 59.6, and is the highest reading in 6 years, indicating there's solid growth in the manufacturing sector. A reading above 50 indicates manufacturing sector expansion rather than contraction. Production is also at its strongest reading in six years, and is up nearly 7 point at 66.9. While the readings are encouraging, they had no impact on mortgage rates this morning.
- Construction Spending Report - construction spending was up 0.2% in March, a little better than expected. Analysts were expecting to see a 0.3% decline. This follows a revised 2.1% decline in February. Year-to-year construction spending has declined 12.3%. This report had no impact on mortgage rates this morning.
What's Happening With Mortgage Interest Rates Today:
Moderate to High Volatility. Mortgage rates are just off their historic lows. While they rose significantly a few weeks ago, they have since come back down a bit. But this may be temporary.
The overall economy is improving without any increase in jobs. In addition, the federal deficit continues to grow while demand for US debt is waning. We're also in the prime home selling and buying season. Historically, mortgage rates rise and fall with the thermometer. Usually from this time of the year and into the summer months, as the weather warms, mortgage rates rise.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past year:
There's little or no potential for lower mortgage rates anytime soon. If you're happy with the interest rate being offered to you today and if you don't want to risk mortgage rates moving higher, then you should apply and lock in now. It's better to have locked when you should have floated than it is to float when you should have locked.
If I were applying for a mortgage today, I would lock in my rate. However, if I were to continue floating my rate, I would proceed with caution and maintain contact with my mortgage professional. I would be ready to lock in at a moment's notice as mortgage rates can change for the worse.
Be sure to check out today's mortgage rates.