Our Real Estate Blog

Mortgage Rates (1/20/2011)

January 21st, 2011 11:38 AM by Lehel S.

Thursday’s bond market has opened in negative territory despite early stock weakness. The Dow is currently down 20 points while the Nasdaq has lost 15 points. The bond market is currently down 13/32, but we will still likely see an improvement of approximately .250 of a discount point in this morning’s mortgage rates due to strength late yesterday.

We had a couple of reports posted this morning, none of which were favorable to mortgage rates. The Labor Department announced early this morning that 404,000 new claims for unemployment benefits were filed last week. That was lower than the 425,000 that forecasts had called for, hinting that the employment sector was stronger than thought last week. Fortunately this data does not carry significant influence on the markets due to its short coverage period, but it did hurt bonds during early trading.

The National Association of Realtors reported a much larger than expected increase in home resales during December. This is bad news for the bond market because it indicates housing sector strength, which is one of the hurdles that the economy must overcome to recover. With housing strengthening, and some minor hints of the labor market beginning to improve at a faster pace, some believe the economy can now gain some traction. Since weaker economic conditions make bonds more attractive to investors, this is bad news for mortgage rates.

December’s Leading Economic Indicators (LEI) was also released late this morning, revealing a 1.0% increase. This was a much stronger increase than many had thought, meaning that it is predicting economic activity will rise fairly rapidly over the next several months. As with the housing news, this is bad news for long-term securities such as mortgage-related bonds.

There is nothing of importance scheduled for tomorrow, making it very likely that the stock markets will be the biggest factor of any c hanges to mortgage rates. If the major stock indexes move higher, we could see mortgage rates follow suit. But, stock weakness should make bonds more appealing and lead to slightly lower mortgage pricing.

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. 
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Posted by Lehel S. on January 21st, 2011 11:38 AM

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