Our Real Estate Blog

Mortgage Rates (8/30/2010)

August 30th, 2010 10:24 AM by Lehel S.

Monday's bond market has opened in positive territory after concerns about the economy and this week's have led to a negative open in stocks. The Dow is currently down 49 points while the Nasdaq has lost 11 points. The bond market is currently up 14/32, but we will likely see little change in this morning's mortgage rates do to weakness late Friday. 

Today's only relevant economic data was July's Personal Income and Outlays. It showed that personal income rose 0.2% while spending rose 0.4% last month. The income reading matched forecasts, but the increase in spending was a little higher than what analysts were expecting. Therefore, this data can be considered neutral to slightly negative for bonds and mortgage rates.

Tomorrow has two releases scheduled that may affect mortgage rates. The first is August's Consumer Confidence Index from the Conference Board. This index measures consumer sentiment about their personal financial situations, givin g us a measurement of consumer willingness to spend. That is important because consumer spending makes up two thirds of the U.S. economy. A decline in confidence would indicate that surveyed consumers probably will not make a large purchase in the immediate future. That sign of economic weakness should drive bond prices higher, leading to lower mortgage rates tomorrow morning. The 10:00 AM ET release is expected to show a reading of 50.0, which would be a small decline from July's 50.4. The lower the reading, the better the news for bonds and mortgage pricing.

Also tomorrow is the release of the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members. It will be interesting to see some of the Fed member's views on the economy and inflation and if they will hint what the Fed's next move may be. But this is one of those events that can cause significant movement in rates after its release or be a non-factor. I suspect that this particular release will cause a little movement in bond prices, but not enough to significantly affect mortgage pricing. 

Overall, I expect to see the most movement in rates Friday, but tomorrow and Wednesday should also be fairly active. Also worth mentioning though is the fact that next Monday is Labor Day so all markets will be closed. The bond market will not close early this Friday, but many traders may head home for the long weekend after Friday's data is posted. This means that trading will likely be thin Friday afternoon even though the markets will still be open. This could lead to additional volatility in rates as traders prepare for the long weekend, so please be careful this week 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 August 30th, 2010 10:24 AM



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