Mortgage Rate Forecast for May 27, 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 102.31 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.5% MBS coupon was trading at 102.03 - down 9/32 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 0.25 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 4-27-2010 to 5-27-2010:
Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:
- First Revision to the 1st Quarter Gross Domestic Product (GDP) - the GDP in the 1st Quarter of 2010 contracted to an annualized rate of 3.0%, and was less than the 3.5% growth rate that was expected, and much less than the 5.4% growth rate in the 4th Quarter of 2009. So far, this has been a jobless recovery, and unemployment in recent weeks has been increasing. As confidence remains low and unemployment remains high, it's not expected that consumers will be purchasing more goods again any time soon. While significant, the data usually does not have an impact on the mortgage market or mortgage rates unless it varies greatly from forecasts.
- Jobless Claims - 460,000 new claims for unemployment were filed last week, and 10,000 more than expected, but 14,000 less than the previous week. The four-week average for unemployment is up by 2,250 to 456,500. However, continuing claims for the week of May 5 is down 49,000 to 4.607 million. All signs indicate the economy has been recovering of late but without much of an increase in jobs. This data is usually not considered to be very important to the mortgage market and had no effect on mortgage rates this morning.
In other news, the Treasury Dept. will be auctioning $31 billion in 7-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.
Stocks markets are up this morning on news that China will purchase European debt.
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 38 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.