Our Real Estate Blog

Mortgage Rates (12/5/2010 - The Week Ahead)

December 6th, 2010 9:24 PM by Lehel S.

This week is fairly light in terms of the number of economic releases scheduled for release. There are only two monthly or quarterly reports on the agenda in addition to two Treasury auctions the middle part of the week that have the potential to influence mortgage rates. That means that the stock markets could be the focal point multiple days.

There are Treasury auctions scheduled for several days this week, but the two important ones are the 10-year Note sale Wednesday and the 30-year Bond sale Thursday. Wednesday’s auction is the more important of the two events and will likely influence mortgage rates more. Results of each sale will be posted at 1:00 PM ET. If they were met with a strong demand from investors, particularly international buyers, we should see afternoon strength in bonds and improvements to mortgage pricing those days. It will be interesting to see just how much of an interest these sales bring. The most recent ones have not gone ve ry well and after last week’s bond selling, it appears general interest in bonds is not high at the moment. However, the recent spike in bond yields could help draw additional buyers.

There is no relevant economic news scheduled for release until Friday morning. October’s Goods and Services Trade Balance report will be posted early Friday morning. This report gives us the size of the U.S. trade deficit, but it is not considered to be highly important to mortgage rates. It is expected to show a $44.4 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing. 

Also Friday is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. It is expected to show a reading of 72.5 , which would be an increase from last month’s final reading.

After last week’s nightmare for mortgage rates, some may think the lack of important data could be good news this week. I am not so sure though since last week’s high profile data didn’t really give us results that pointed towards an economic recovery anytime soon. If the data was much stronger than expected, the break would be welcomed this week. I think the hurdle could be the fact there is nothing on tap to contradict last week’s rally that was based much more on speculation than factual data. If the stock markets can extend last week’s gains, we may see further increases to mortgage rates. But stock weakness should benefit the bond market and mortgage rates.

Overall, I don’t believe we will see nearly as much volatility in the markets and mortgage pricing as we saw last week. Unfortunately, this means that there is little chance of recovering all of last week’s spike in mortgage rates. If the stock markets give back some of last week’s rally, we should see mortgage rates close the week lower than tomorrow’s opening levels. With the shellshock of the recent volatility still fresh, it would be wise to maintain contact with your mortgage professional until the market stabilize.

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. 
Posted in:General
Posted by Lehel S. on December 6th, 2010 9:24 PM

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