Our Real Estate Blog

Mortgage Rates (1/6/2011)

January 6th, 2011 1:42 PM by Lehel S.

Thursday’s bond market has opened in positive territory after this morning’s only economic data gave us favorable results. The stock markets are also helping to boost bond prices with losses in the Dow of 43 points and the Nasdaq 3 points. The bond market is currently up 9/32, but we will still see an increase of approximately .125 - .250 of a discount point in this morning’s mortgage rates due to weakness in trading late yesterday.

The Labor Department gave us this morning’s only economic data with the release of last week’s unemployment figures. They reported that 409,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 391,000 and higher than forecasts. Last week’s report that tracked the previous week’s claims initially showed 388,000 claims that had surprised many people. This means that the holiday schedule and weather likely did artificially influ ence those numbers and that the labor market did not improve as much as some wanted us to believe. That is good news for the bond market and mortgage rates because the weak employment sector has helped limit economic growth, making longer-term securities such as mortgage-related bonds more attractive to investors. Unfortunately, since this data tracks only a single week’s worth of new claims, its impact on mortgage rates is usually minimal.

Tomorrow morning will have the Labor Department in a much brighter spotlight than today. They will post December’s monthly employment figures early tomorrow morning, with all eyes looking at the headline numbers. This report is arguably the most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, smaller than expected increase in new payrolls and a decline in earnings would be ideal news for the bond market.

Current forecasts call for the unemployment rate to slip from 9.8% to 9.7%, that 150,000 new jobs were added to the economy and an increase in earnings of 0.1%. If we see weaker than expected results, mortgage rates should improve noticeably tomorrow. However, stronger than expected readings will likely renew last month’s optimism about the economy, pushing mortgage rates sharply higher. I am a little concerned that we may see fairly decent numbers in this report, hence the cautious approach towards interest rates. But, surprisingly weak readings would likely lead to a rally in bonds and selling in stocks that would be great news for mortgage shoppers. A lot to potentially gain by floating a rate into this report, but a lot of risk also. Be careful if you have not locked a rate yet.

Also worth mentioning about tomorrow is an appearance by Fed Chairman Bernanke. He will testify to the Senate Budget Committee late tomorrow morning. We will speak about monetary policy, economic conditions and fiscal issues. The markets pay close attention whenever he speaks, so any surprises in his words will cause volatility in the financial markets and mortgage rates. If he does give us a couple of surprises and the Employment report varies much from forecasts, we could have an interesting morning in the markets and mortgage rates.

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. 
Posted in:General
Posted by Lehel S. on January 6th, 2011 1:42 PM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog: