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Mortgage Rates (11/3/2010 - Afternoon Update)

November 4th, 2010 8:05 AM by Lehel S.

WEDNESDAY AFTERNOON UPDATE:


This week’s FOMC meeting has adjourned with some interesting and relevant news. As expected, there was no change to key-short term interest rates. The post-meeting statement said that the Fed feels the economy is growing, but at a ?disappointingly? slow pace. They renewed their statement that they intend to keep key rates near current levels for some time and again indicated that inflation was not much of a concern at this point. All of this can be taken as good news for the bond market and mortgage rates.

They also announced another debt purchase program in an effort to push borrowing rates for consumers and businesses lower to help fuel spending and economic growth. The $600 billion campaign can be considered fairly sizable, but it will be spread over several months and will extend until the middle of next year. In addition, they will be reinvesting proceeds from current investments back into Trea suries, which is expected to total another $250 - $300 billion. This move does not come as a surprise to the markets as there were many hints and speculative comments made over the past couple of months.

The bad news is that mortgage-related bonds are not being specifically targeted in the buying program. Many investors had hoped to see mortgage rates targeted by any move of the Fed. Still, the program’s goal is conducive to long-term interests such as mortgage rates. So, if the plan works as the Fed expects it to, we should see mortgage rates remain low for an extended period of time also. Unfortunately, the bond market has some concerns and has reversed this morning’s gains.

Today’s news has caused stocks to fluctuate with no concrete direction. They have erased earlier losses, pushing the Dow up 14 points and the Nasdaq up 4 points. However, these gains are minor and shouldn’t be too concerning for the bond market or mor tgage rates. The bond market has given up this morning’s gains to currently stand nearly unchanged from yesterday’s close. This may cause some lenders to revise their pricing higher this afternoon by approximately .125 of a discount point from this morning’s rates.

This morning’s only relevant economic data was September’s Factory Orders report. It revealed a 2.1% increase in new orders at U.S. factories for durable and non-durable goods. This was a larger increase than expected, indicating strength in the manufacturing sector. However, this data is considered to be only moderately important and has not influenced this morning’s mortgage rates.

Tomorrow’s only monthly or quarterly data is the 3rd Quarter Productivity reading. The productivity index is expected to show a 0.9% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because high levels of productivity allows the economy to expand without inflationary pressures being a concern.





We also will get weekly unemployment numbers from the Labor Department tomorrow morning. They are expected to say that 445,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. This data normally doesn’t affect mortgage rates unless it varies greatly from forecasts. However, since this week’s update will cover the last week of the month and we will get monthly statistics Friday, it may carry more influence on the markets and mortgage rates than usual. The higher the number of claims, the better the news for the bond market and 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 November 4th, 2010 8:05 AM

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