September 16th, 2008 2:35 PM by Lehel Szucs
TUESDAY AFTERNOON UPDATE:
Today's FOMC meeting has adjourned with an announcement of no change to key short-term interest rates. The post-meeting statement indicated that the Fed felt key rates were low enough to spur economic activity. The stock markets initially reacted negatively to the news since traders were expecting a rate cut, but then staged a rally that pushed the Dow up 141 points and the Nasdaq up 28 points.
The bond market did not fair so well. As expected, as soon as stocks started to rise, bonds suffered. The same funds that were moved into bonds and drove prices higher yesterday, now were hurting bonds as they were shifted back into stocks. The result was the bond market closing down 26/32 and a sizable increase to mortgage rates. I suspect that there is more room for bonds to fall if stocks continue to move higher. Therefore, holding the lock recommendations seem to be the prudent stance at this time.
Today's on ly relevant economic data was August's Consumer Price Index (CPI). It showed a decline in the overall reading of 0.1% and an increase of 0.2% in the core data reading. Both of these readings matched forecasts, therefore, they had little impact on the bond market or mortgage rates.
August's Housing Starts report is the only relevant data being posted tomorrow morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. Tomorrow's report is expected to show a drop in new housing starts from July's levels.
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.
©Mortgage Commentary 2008