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If you are considering locking in an interest rate for a New York mortgage or a Florida mortgage, read this post.
Tuesday’s bond market opened in positive territory following weaker than expected economic data and sizable stock losses. The Dow is currently down 127 points while the Nasdaq has lost 18 points. The bond market is currently up 13/32, which should improve this morning’s mortgage rates by approximately .250 of a discount point.
Both of this morning’s economic reports gave us favorable results. The first was April's Housing Starts that showed a whopping 10.6% drop in starts of new home construction. This was much weaker than expected, indicating that the housing sector is still struggling. Even though this report is not known to heavily influence the markets and mortgage rates, today’s variance from forecasts was wide enough to fuel bond buying and helped improve this morning’s rates.
April's Industrial Production was posted mid-morning and revealed no change from March’s level, which was well below forecasts of a 0.5% increase. That means that output at U.S. factories, mines and utilities was not nearly as strong as many had thought. This hints at manufacturing sector weakness, also making this data good news for the bond market and mortgage rates.
Tomorrow’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.
Today’s bond rally has pushed the yield on the benchmark 10-year Treasury Note down to its lowest level of the year (3.10%). While this is good news for mortgage rates, it does raise the possibility of bond yields bouncing from this level and moving upward. Since bond prices and yields move in opposite directions, and mortgage rates follow yields, this would translate into higher mortgage rates. It will be interesting to see if this level will hold. If bond prices continue to rise, pushing the 10-year yield below 3.10%, we could see more improvements to mortgage rates in the immediate future. However, if we unable to break this threshold, I would expect yields and mortgage pricing to move higher.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 NY and Florida state Banking Depts. and our loans are arranged through third party providers.
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