Our Real Estate Blog

Mortgage Rates (1/28/2011)

January 29th, 2011 6:57 PM by Lehel S.

Friday’s bond market opened down slightly even though this morning’s economic news was overwhelmingly favorable for bonds, but has since moved into positive ground. The stock markets have reacted to the news as we would have expected with the Dow down 120 points and the Nasdaq down 58 points. The bond market is currently up 11/32, but I don’t believe we will see much of an improvement in this morning’s mortgage pricing. The good news though is that we will likely see an intra-day improvement to rates if the stock markets remain near current levels and the bond market does not give back its late morning gains.

The first of today’s three economic releases was the most important. That was the initial reading to the 4th Quarter GDP. It is considered to be the best measurement of economic growth or contraction, so it is known to heavily influence the markets and mortgage rates. Today’s release revealed an annual rate of gro wth of 3.2% that was an increase from the 3rd quarter but well short of expectations. Even a key inflation reading within the data came in well below forecasts. Therefore, this should be great news for the bond market and mortgage rates. The stock markets have responded accordingly with a negative morning. Bonds were slow to react but have since started to catch-up.

The 4th Quarter Employment Cost Index (ECI) matched forecasts of a 0.4% increase, making it a non-factor in this morning’s trading. This index tracks employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. The lack of surprise has prevented it from influencing mortgage pricing.

The third and final report of the day was the revised reading to the University of Michigan's Index of Consumer Sentiment for January. It showed a reading of 74.2 that exceeded forecasts, meaning consumers were felt better about their own financial situatio ns than analysts had predicted. This can be considered bad news for bonds since it means consumers may be more apt to make large purchases in the near future, but this reading usually doesn’t carry the importance to offset the surprise GDP reading. 

Next week is extremely busy in terms of economic releases. There are quite a few important reports scheduled, including December’s Personal Income and Outlays report early Monday morning. Some of the data is considered to be highly important. There are relevant reports scheduled four of the five days with multiple releases on a couple of days. It appears it is going to be an active week for the markets and mortgage rates, so look for details in Sunday’s weekly preview.

If I were considering financing/refinancing a home, I would.... Float 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 be tween 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. 
Posted in:General
Posted by Lehel S. on January 29th, 2011 6:57 PM

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