Services Growth Slows; Rates At All Time Lows - Daily Mortgage Rate Update for July 6, 2010

Mortgage and Lending with Province Mortgage Associates - NMLS #2861

Service Sector Growth Misses Expectations; Accounts for 80% of all US Jobs - Rate Lock Report for July 6, 2010

Today marks the start of a short, quiet week, from the perspective of economic data. We will receive exactly two pieces of interest-rate-influential data this week; one the Institute for Supply Management's Services Sector Index this morning, the second the weekly unemployment claims on Friday. For the rest of this week, I anticipate mortgage rates will be driven more by activity in stock markets.

The ISM Services Sector Index measures the pace of expansion or contraction in the services sector, which comprises as much as 80% of the US economy, and includes businesses like hair salons, landscapers, accounting, bookkeeping, payroll, even mortgage and legal services. The index measures activity on a scale based around 50. A level of 50 indicates neither growth nor contraction.

In today's report, the main index slipped to 53.8 from 55.4 in May. Economists had been expecting a decline in the index to 55.0. The index also features an employment component, designed to guage the likelihood of service businesses hiring new workers. This component declined to 49.7 from 50.4, suggesting further weakness in business hiring.

The markets have brushed off this data, for the most part, as all sectors of the financial markets are rallying significantly on other news. While there are concerns that the upcoming European bank stress test may be inadequate to truly identify all problems that may exist. Meanwhile, the central bank of Australia had some upbeat comments regarding that country's economy, suggesting growth there is expected to continue. Australia has been one of the world's few bright spots, and has been strong enough for its central bank to raise interest rates 6 times in the past year. Analysts principally cite growth in China and that country's demand for iron ore and energy.

Mortgage rates are at the lowest point ever, with last year's average 30-year fixed rate at 4.58%. I've seen many banks offering rates as low as 4.25% with 1-2 points. Still, refinancing is difficult for many homeowners who have seen the housing market rob their homes of value.

Mortgage pricing has opened better this morning, and has showed some continued improvement as the day has progressed. Based on the current pricing level, and the negligible amount of data this week, I feel it is Safe to Float at all lock periods. I suspect that markets will allow mortgage pricing to continue to hold its best ever level currently held, because of the growing doubts about the health of the economic recovery. The largest concern I see with this recommendation is an advancing stock market. The DJIA and other indices are all around 1.5% higher today; this is fine for now, but if it continues throughout the week, mortgage pricing could retreat somewhat.

There are a few other issues out there that could affect mortgage and other fixed-income pricing. The Federal Reserve still holds somewhat more than $1 trillion in mortgage-backed securities, which it must begin liquidating at some point. Finally, systemic risk is still present in the myriad problems we hear about daily in other countries' economies.

If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!

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July 2nd, 2010 Update

Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.


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