Our Real Estate Blog

Mortgage Rates (10/27/2010)

October 27th, 2010 2:01 PM by Lehel S.

Wednesday’s bond market has opened in negative territory despite mixed economic data and early stock losses. The stock markets are in selling mode with the Dow down 75 points and the Nasdaq down 3 points. The bond market is currently down 16/32, which will likely push this morning’s mortgage rates higher by approximately .250 of a discount point.

The Commerce Department said early this morning that September’s Durable Goods Orders rose 3.3% last month, exceeding the forecasted 1.8% increase by a fairly wide margin. The spike in new orders for big-ticket products indicates that the manufacturing sector was stronger than thought last month. However, a secondary reading in the report that measures new orders with larger priced and more volatile transportation-related products excluded showed a much weaker than expected 0.8% decline. Therefore, this report can be considered relatively neutral for bonds since the headline number exceeded forec asts but orders for items that are considered less volatile month-to-month fell short of expectations.

September’s New Home Sales figures were released late this morning, revealing a larger than expected increase in newly constructed home purchases. Fortunately for the bond market and mortgage rates, this data is not considered to be highly important because it tracks such a small percentage of all home sales in the U.S.

Also worth noting is the first of this week’s two Treasury auctions that may influence bond trading enough to affect mortgage pricing. 5-year Treasury Notes are being sold today while 7-year Notes will be auctioned tomorrow. If these sales are met with a strong demand, particularly tomorrow’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates. Recent auctions did not go as well as expected, so I am not looking for these auctions to help mortgage rates.

There is no monthly economic data being posted tomorrow, but we will get weekly unemployment figures from the Labor Department. They are expected to say that 458,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week, hinting that the labor market is not improving. The larger the number of new claims the better the news for bonds and mortgage rates. But since this data tracks only a single week’s worth of new filings, it usually take a large variance from forecasts for it to influence mortgage pricing.

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 6 0 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 October 27th, 2010 2:01 PM

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