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If you are considering locking in an interest rate for a New York or Florida mortgage, read this post.
Tuesday’s bond market has opened in well in positive territory, mostly as a result of weekend geopolitical news from overseas. The stock markets are reacting to the same news as expected with Dow down 94 points and the Nasdaq down 44 points. The bond market is currently up 20/32, which should improve this morning’s mortgage rates by approximately .250 - .375 of a discount point from Friday’s morning pricing.
February's Consumer Confidence Index (CCI) was today’s only important economic data and it was not exactly favorable for mortgage rates. The Conference Board said late this morning that the CCI rose to 70.4 this month, exceeding forecasts of a 65.0 reading. This means that surveyed consumers were much more optimistic about their own financial situations than many had thought. That is bad news for the bond market and mortgage rates because it indicates that consumers are more apt to make large purchases in the near future.
This morning’s bond rally is nice for mortgage shoppers, but I don’t like to see these sudden and large improvements due to news from overseas. Today’s rally is a typical knee jerk reaction to the news, particularly Libya, and is known as flight to safety. That means investors are moving funds into bonds as a safe haven from the volatility of stocks that are reacting to the news. If the situation that is causing the shift in funds stretches for a longer period, the sudden jump in bond prices is good news and may hold. However, if concerns about the situation overseas subside, we usually see those same funds move away from bonds and back into stocks. The result was only a temporary improvement in mortgage rates, especially since rates tend to move higher much quicker than they move lower. So, let’s pay close attention to the matter and see where it takes us, but it would be premature to consider this the beginning of a significant bond rally and downward trend in mortgage rates.
Tomorrow has only one relevant economic report scheduled and the first of this week’s two Treasury auctions that have the potential to influence mortgage pricing. The National Association of Realtors will post January’s Existing Home Sales report late tomorrow morning. It tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a small decline in sales of existing homes, meaning the housing sector remained fairly flat during the month. Ideally, the bond market would like to see a sizable decline in sales because weak housing is one of the hurdles that the economy must overcome to recover from the recession. The longer it takes for the housing market to recover, the longer it will take the economy to do the same.
The Treasury will sell 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates.
Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either tomorrow or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially if still floating an interest rate.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Empire Home Mortgage Inc. is a registered Mortgage Broker with the NYS and Florida Banking Depts and our loans are arranged through third party providers.
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