Mortgage Rate Forecast for June 1, 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 102.00 this morning - the same as Friday's close.
- At 9:30 AM, the 4.5% MBS coupon was trading at 102.19 - up 6/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and so do mortgage rates. I expect that mortgage rates will be up to 0.250 points better in price this morning as compared to Friday afternoon.
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 5-2-2010 to 6-1-2010:
Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:
- Institute for Supply Management's (ISM) Manufacturing Index - dropped in May to a reading of 59.7, about as expected. While down 0.7 points from April's reading of 60.4, this indicates there's solid growth in the manufacturing sector. Readings above 50 indicates manufacturing sector expansion rather than contraction. While the readings are encouraging, they had no impact on mortgage rates this morning.
- Construction Spending Report - construction spending was up 2.7% in April, much little better than expected. Analysts were expecting to see no change. This follows a revised 0.4% increase in March. Year-to-year construction spending has declined 10.5%. This report had no impact on mortgage rates this morning.
In other news, Spain's credit rating was reduced from AAA to AA+ on Friday. This will weigh on Spain's ability to maintain growth while reducing their debt.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past year:
Mortgage Rate Lock Advice:
Mortgage rates are no longer at their lows of 2010. On Friday, the price of the FNMA 30-Year 4.5% Coupon closed within 50 basis points of its all-time high of 102.69 which was on November 30, 2009. This morning, the MBS coupon was within 78 basis points of that all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.875% with no points Friday, 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 4.75% with 0.50 point today.
Mortgage rates were already at their lows for 2010. While it's still possible that mortgage rates could go lower again with the ongoing economic crisis in Europe as well as the housing market crisis in China, it won't be by much, and I would not risk the chance waiting for it.
If I were closing within the next 5 - 7 days, I would lock in the rate.
If you are closing in more than 7 days, send me an email to get my rate lock advice.
Be sure to check out today's mortgage rates.
