Mortgage Rate Forecast for May 26, 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 102.38 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.5% MBS coupon was trading at 102.19 - down 6/32 from its opening.
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 yesterday.
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 4-26-2010 to 5-26-2010:
Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:
- Durable Goods Orders Report - there was a 2.9% increase in new durable goods orders in April, and is much more than the 1.5% increase that was expected. This follows a revised no change in March, a 1.1% increase in February, and a 3.0% increase in January. The large increase is attributed primarily due to an increase in orders for civilian aircraft. However, when the transportation component is excluded, new durable goods orders declined 1.0% which follows a 4.8% increase in March and a 0.9% in February. Year-on-year, overall new orders for durable goods are up 18.9% from April 2009. When transportation is excluded, new durable goods orders are up 18.0% from the same time last year. This report shows that the manufacturing sector continues to gain momentum, and led to higher mortgage rates this morning.
- New Home Sales - rose 14.8% in April to an annualized rate of 540,000 homes - much more than expected. Analysts were expecting to see an annualized rate of 425,000 homes. In addition, the inventory of new homes on the market dropped to a 5.0 month supply - the lowest level in 42 years. However, the average price of new homes fell 9.7% to $198,400. It's clear that the extended home buyer tax credit helped to sell new homes. As such, we may see a decrease in new home sales now that the homebuyer tax credit has expired. Normally, this data did not have much of an impact on the mortgage market this morning. However, this report is fairly significant and led to higher mortgage rates this morning.
In other news, the Treasury Dept. will be auctioning $42 billion in 5-Year Notes today. The Notes are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond market move higher (resulting in lower mortgage rates) during afternoon trading. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to a broader selling in bonds and mortgage backed securities. The selling of mortgage backed securities could result in higher mortgage rates.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past year:
Mortgage Rate Lock Advice:
Prices of mortgage backed securities are at their highs of 2010. Yesterday, the price of the FNMA 30-Year 4.5% Coupon closed within 31 basis points of its all-time high of 102.69 which was on November 30, 2009. This morning, the MBS coupon was within 35 basis points of that all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.50% with 1 point yesterday, and if price of the MBS 4.5% coupon were to go as high as 102.69, then the best the 30 year fixed mortgage rate would be is 4.50% with 0.625 point today.
If I were applying for a mortgage today, I would lock the rate as mortgage rates are already at their lows for 2010, and they're probably as low as they're going to go. While it's possible that mortgage rates could go even lower with the ongoing economic crisis in Europe, it won't be by much, and I would not risk the chance waiting for it.
Be sure to check out today's mortgage rates.