Our Real Estate Blog

Mortgage Rates (3/7/2011)

March 8th, 2011 8:03 AM by Lehel S.


Monday’s bond market has opened in negative territory, following suit of stocks as investors digest recent events from abroad. The stock markets are starting the week with losses as last week’s weakness extends into this morning’s trading. The Dow is currently down 70 points while the Nasdaq has lost 40 points. The bond market is currently down 7/32, but we will likely still see a small improvement in this morning’s mortgage rates compared to Friday morning pricing due to strength in bonds late Friday.

There is no relevant economic data scheduled for release today. The spike in oil prices continues draw attention and concern that this may be a longer-term issue than initially thought. With oil almost breaking $107 a barrel this morning, more analysts are raising concerns about the impact this jump will have on the economy. High oil costs affect more than just the price at the pump for consumers. Rising fuel prices means higher tran sportation and shipping costs for everything from food to manufactured products to service-related businesses. Those increases are usually passed on to businesses and consumers, threatening economic growth and corporate earnings. 

Bond prices have benefited from the concerns in the stock market since weaker economic conditions make bonds more attractive to investors. However, at some point the bond market will also have to consider the impact this will have on overall inflation, both short-term and long-term. There were already signs within the economy that inflation was starting to rise, but was below concern levels of the Fed. If oil prices remain high and the costs of it are passed onto businesses and consumers to protect corporate earnings, the bond market could suffer as investors shed holdings. Inflation is the number one nemesis of bonds because it erodes the value of a bond’s future fixed interest payments. As a result, bonds become less attrac tive to investors and are sold at a discount to offset the loss of value after inflation, leading to higher mortgage rates. Therefore, I am recommending a cautious approach towards mortgage rates for the immediate future.

There are no relevant economic releases or relevant events scheduled for today or tomorrow. The first event of the week is the 10-year Treasury Note auction Wednesday. The 30-year bond sale will be held Thursday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading as it would indicate that investors still have an appetite for longer-term securities. However, weak demand in the sale could lead to selling and an increase to mortgage rates. 

Overall, it will likely be another active week in the mortgage market. Friday will probably be the most important day of the week with the Retail Sales report due, while the calmest day could be tomorrow, depending on the stock markets. I am expecting to see the most movement in rates the latter part of the week, so please be careful if still floating an interest rate.

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... Lock 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 March 8th, 2011 8:03 AM

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