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  1. Mortgage Rates: WARNING! Higher Rates Ahead?

    By on February 9, 2012

    After a snooze inducing week thus far, we finally have news that will likely move the markets and thus mortgage rates.  The news is positive—the impact on mortgage rates, not so much.  As we have repeatedly tried to make clear over the history of this blog, news and data suggesting growth or strength for the US economy have a negative effect on mortgage rates.  Today the news that Greek officials have agreed to the terms demanded by Euro-zone officials in order to receive a second round of bailout funding, coupled with improved jobless claims numbers in the US, create conditions that may push mortgage rates higher.

    In Greece the three primary political parties have agreed to terms that will among other things cut the minimum wage by 20% and supplemental pension benefits by 20%.  The markets in Europe and the premarket activity in the US have been very positive in response.  What does this decision really mean?  Does it mean that the risk of sovereign default in Greece is eliminated? No, it simply means that it has been kicked a little further down the road.

    Greek politicians are simply being expedient at this point.  With the deadline to receive the bailout funds close at hand and a nationwide election coming after, it is simply prudent to accept the terms now (along with your political opponents) and then fight the election over how it was the other party(ies) fault.  Moreover, once a new government is in place they can decide to renege on the deal just struck.  Consequently, while mortgage rates might move higher on this news today, I do not expect it to be significant.

    Far more important for the longer-term direction of mortgage rates is the state of the US job market.  Following last Friday’s blowout positive Non-Farm Payrolls report, traders were looking for confirmation of a positive trend in hiring.  It surely came this morning with weekly jobless claims coming in significantly below forecasts.  This news does set the stage for potential increases in mortgage rates that could be meaningful.

    Consequently for consumers still on the fence—THIS IS YOUR WARNING—we may never, in our lifetimes see rates again as low as they are currently.  It is time for all homeowners with a mortgage to investigate the possibility of a refinance.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  2. Mortgage Rates: Perhaps the Slowest Day Ever

    By on February 8, 2012

    Financial markets in the US today have virtually nothing new to guide them…no economic data, no major breaking news, nothing. The lead article on CNBC’s website this morning– “What the New 401k Rules Mean for Your Savings.” I am sure that the article contains interesting and even important information relative to retirement planning, but for a media outlet that is predicated on covering the financial markets, that is a sure sign that things are slow.  For mortgage rates today it means more of the same.  Sitting just above all-time lows, I see no reason to expect a change today. Unless…Unless we finally see a deal among the three political parties in Greece to accept the bailout deal that has been offered.

    With supposed deadlines being missed related to the Greek situation everyday there is no reason to expect that today will be the day a deal is finally agreed to or, dare we say, rejected.  Representatives of Greece’s three primary political parties the conservative New Democracy, PASOK socialist and far-right LAOS are reviewing a 15 page summary of the proposed deal.  Among the most difficult terms to accept are a roughly 20% further cut in the minimum wage and a 15% cut in supplemental pension benefits.  As you might imagine, these reforms are very unpopular in Greece.

    What we do know is that a week from today, February 15, 2012 is a hard deadline according to the Euro zone.  They have stated that the deal must be approved by Greece, the ECB and the IMF by next Wednesday if the funding is to be put in place in time to avoid a default.  A prominent Greek economist is calling for exactly that—a default by Greece as the best outcome for his nation.  He has stated this week that the bailout is damaging the country and will not allow it to recover, while a default will enable Greece to unload a tremendous financial burden and be in a better position to care for its people.

    If Greece decides to take the deal…mortgage rates may rise slightly as what is believed to be a risk to the global economy is removed.  If Greece decides to default…mortgage rates may drop slightly as risks to the global economy may increase.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  3. Mortgage Rates: Holding Pattern Awaiting Greece

    By on February 7, 2012

    Mortgage pricing this morning is in a holding pattern awaiting news from Greece on the fate of the bailout that will keep the nation from defaulting on its debts.  With no other economic data in the US today or tomorrow, that holding pattern could last for a while.

    Greece has seven conditions it must meet in order to receive the bailout funds it needs.  Creditor nations, through the International Monetary Fund established a three-person review committee, known as “the troika” to establish conditions for Greece and to certify their adherence.  The deadline for Greece to meet these seven conditions has already passed—it was yesterday.  As of that point Greece had only met one of the seven conditions.  Greek officials were coy when asked about not meeting the deadline, suggesting that they were unaware that a deadline existed.

    Throughout this ordeal in Greece over the past year deadlines have come and gone, deals have been rumored only to never materialize and actual agreements have been largely ignored.  So reports today suggesting: “The Greek government is working on the final document that will be discussed at the political leaders’ meeting later in the day”, from an unnamed government official, carry little weight with market traders. Still it has been enough so far today to keep mortgage-backed securities pricing down and the pressure on rates to move higher.

    The trouble for Greece agreeing to this deal was explained by one analyst this way. “Imagine the US needed a loan to avoid default a couple of months before a Presidential election.  Imagine further that the creditors were demanding that both the Democrats and the Republicans sign-off on a deal that is not supported by over 70% of their party’s voters prior to the creditors agreeing to lend the money.  That is what Greece is facing now.”

    In the US today there will be an auction of US Treasury debt at 1 PM.  The only reason to keep an eye on the auction is that it is the first auction following the Fed’s statement regarding its intention to hold interest rates at current levels through “late 2014”, but it is also after the blowout Non-Farm Payrolls report.  I expect a calm auction with no surprises.

    I strongly advise consumers who want to refinance their existing mortgage or purchase a home to lock mortgage rates as quickly as possible before any other potential “good news” can push rates higher.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  4. Mortgage Rates: Upward Pressure, But No Fuel

    By on February 6, 2012

    This week is devoid of much in the way of fuel to keep the upward momentum going for mortgage rates.  Last week appeared to be moving toward a new string of perpetually lower mortgage rates based on economic data that was good but not quite as good as expected.  Then came the blowout results from Friday’s Non-Farm Payrolls report and mortgage rates reversed course.  Now the pressure definitely seems to be on mortgage rates increasing from this point—but they have little impetus to get them started.

    After one of the busiest weeks for US economic data last week, this week is one of the slowest of the year.  Not until Thursday’s Weekly Jobless Claims report is there any new US data to impact the markets. On Friday, Trade Balance and Consumer Sentiment reports will be released.  Of the three reports, the Weekly Jobless Claims is probably the most significant as it offers the potential of confirmation of the trends seen in the Non-Farm Payrolls report.

    This week’s biggest market moving news will come from Europe.  At this time on Monday morning, there is still no deal among the various political groups within Greece to accept additional reforms that will reduce costs for the government to a level that is acceptable to their European benefactors.  Without those cost reductions, the Eurozone will not provide the bailout loans that Greece needs to avoid default.  The original deadline for internal agreement in Greece—12 noon—has passed.

    Mortgage rates are going to have a difficult time finding clear direction this week.  For consumers needing a refinance loan or a purchase loan, this will afford another opportunity to get in on “near record” low rates.  Should the US economy continue to show strength over the coming weeks, this opportunity will begin to wane.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  5. Mortgage Rates: More Jobs = Higher Mortgage Pricing

    By on February 3, 2012

    A blowout Non-Farm Payrolls (NFP) report this morning has mortgage rates heading higher.  After a week filled with data that was roughly in-line with expectations the NFP report blew away forecasts.  The expectations were for 150,000 new jobs to be created in January, yet when the counting was done 243,000 new jobs were documented.  This is certainly confirmation that the US economy has strengthened dramatically, yet the naysayers have already begun to spin why the jobs uptick may be limited.

    Two additional economic reports have the potential to accelerate the upward move in mortgage pricing today or to moderate it.  At 10 AM the ISM Services Index and Factory Orders report will be released.  The ISM Services Index is forecasted to increase from last month, which seems like a good bet given the number of service-sector jobs that were created according to the NFP report.  The Factory Orders report is forecasted to drop slightly which also seems likely given the weakness in the ISM Manufacturing Index earlier in the week.  If these reports come in as expected, I suspect that it will cause further losses in MBS and more upward momentum for mortgage pricing.

    On Monday Euro-Zone financial ministers are meeting and there is hope that approval of the second round of bailout funding will be approved at that time.  However, there is much still to be agreed to.  After reaching a deal with private creditors to cut their payouts from existing Greek debt by 70%, the burden is now on the Greek government to come up with additional savings from labor market and other reforms that will drop the country’s debt/GDP ratio to 120%.  This is a tall task as Greek politicians who must approve these reforms don’t want to be associated with these very unpopular reforms.  I would not be surprised to see Monday come and go with no deal and no bailout funds for Greece.

    After a week in which the attention was primarily on the state of the US economy, next week will see a return to the Euro-centric focus that has been so pervasive for over a year.

    Have a great weekend!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  6. Mortgage Rates: Change in Trend “Or Not”

    By on February 2, 2012

    As I discussed at the outset of this week, it was destined to be a very important week for mortgage rates.  With more data of significance announced this week as compared to almost any other week during the year, we could see a major change in the mortgage trend.  What has been a very favorable, downward trend for mortgage rates could continue with weak economic news. Or strong economic news could cause a reversal in the trend and send mortgage rates higher.  We could have seen this type of movement…or not.  What I did not count on, based on my experience with economic forecasts, was for the data this week to come in almost exactly as forecasted.

    Thus the result so far this week has been virtually no change in mortgage pricing at all since last Friday.  However—it’s only Thursday and the biggest economic report of all is still to come tomorrow.  The Non-Farm Payrolls Report still has the power to establish a trend for mortgage rates for the foreseeable future.  This time though, I will include the possibility that a result, “in-line with expectations”, could reinforce the current level of mortgage pricing.

    Today’s economic data that is moving mortgage pricing nowhere was Productivity and Weekly Jobless Claims.  Productivity was forecasted to increase by .8%–the actual result was an increase of .7%.  Weekly Jobless Claims were forecasted at 370,000—the actual result was 367,000.  Despite these reports offering no positive or negative surprise, I do see signs of improvement.  The drop in productivity signals that businesses are getting less from efficiency or technology changes and will soon need to increase labor in order to boost production.  Also, the slow drop in jobless claims signals a slow (painfully slow) improvement in the labor market.  These measures are connected and the drop in the first should lead to an accelerating drop in the second.

    Related to the European debt crisis, the biggest news of the day is a meeting between German Chancellor Angela Merkel and China’s Premier Wen Jiabao.  The Chinese leader did provide some positive news as he stated that China may “get more involved” with efforts to resolve the crisis.  With almost $4 trillion in reserves, China certainly has the ability to help.  This should provide another calming bit of news for world markets today.

    Today mortgage rates are likely to stay very close to current levels.  Tomorrow the Non-Farm Payrolls report could lead to a change in the mortgage rate trend…or not!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  7. Mortgage Rates: Obama to “Friend” Millions?

    By on February 1, 2012

    Today is the day that Facebook will file its initial public offering.  There are also rumors that today is the day that President Obama will announce his plan to enable millions of homeowners to refinance at current historically low interest rates.  In some ways, it’s as if he is sending a huge “friend request” to American homeowners.  Is this good economic policy or simply politics as usual and what effect will it have on mortgage rates?

    It appears from early trading in mortgage-backed securities (MBS) today that the markets are focused on the Facebook IPO and stocks are set to rise.  This will put pressure on MBS pricing today and could keep rates from falling any further.  Unless the stock market surges more than appears likely, mortgage rates will likely remain close to current levels throughout the day.

    Several economic reports are also in the mix today.  The ADP Employment Change report came in about at the point of expectations though newly created jobs were down significantly from December.  Analysts were encouraged however by the surge in new service sector jobs, explaining that a broad-based improvement in employment across all sectors is necessary for sustainable economic growth.

    At 10 AM both the Construction Spending report and the ISM Manufacturing Index will be released.  The ISM Index is a gauge of manufacturing industry activity and is a very important report.  If this report is at or above expected levels, mortgage pricing may feel more upward pressure.  If, however, we see a surprise to the downside, then mortgage pricing may improve.

    Let’s get back to the President’s refinance plan.  According to reports the plan will call for a tax on large banks to pay for the cost of allowing homeowners to refinance into Federal Housing Administration loans.  Having failed to get the conservator of the other two government-sponsored housing agencies to go along with a similar plan, the president has turned to the one agency he has direct control over.  That being said, the plan has virtually no chance to pass Congress as it has failed to even be acted on twice before.

    As to its public policy and economic implications my belief is that it is poor policy to allow refinancing into government (taxpayer) backed mortgages by homeowners that would not otherwise qualify for the loans.  Economically, it would provide substantial stimulus initially but it might also have the unintended consequence of causing mortgage rates to rise.  Banks unable to handle the onslaught of borrowers, and fearing repurchase risks from loans that go bad, may raise their interest rates to discourage borrowers.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  8. Mortgage Rates: Time for a Pause in the Records

    By on January 31, 2012

    Mortgage rates appear poised for a flat to higher opening for the day as strong economic news is reported and progress is made in Greek debt negotiations.

    Economic data to be reported in the US today includes the Case-Shiller Home Price Index at 9 AM, the Chicago PMI report at 9:45 AM and Consumer Confidence at 10 AM.  Expectations for the Case-Shiller Index are for a continued drop in home prices, yet a decline in the rate of that drop.  The Chicago PMI report is one of the most important measures of manufacturing activity in the US due to the concentration of manufacturing in the Chicago region.  Analysts expect the report to be flat—but maintain its current high level.  As for Consumer Confidence, analysts expect it to surge even higher from current readings signaling that the important consumer sector of our economy is becoming more confident with each passing month in the long term prospects for the economy and for themselves.

    Markets are also encouraged by progress toward more significant fiscal controls in the European Union today.  25 of the 27 member states, currently excluding only the UK and the Czech Republic, have signed a new treaty which would impose severe penalties on any nation that fails to meet established guidelines for fiscal discipline.  This of course relates most directly to Greece currently, but will impact other member states as the year progresses.

    The US stock market is getting close to what is known as the “golden cross”.  This is a technical indicator that describes when the 50-day moving average in the S&P Index crosses the trend line for the 200-day moving average.  This is historically viewed as a bullish sign for the markets.  In this particular case however it is the decline in the 200-day average that is leading to the event rather than the rise in the 50-day average.  In fact, the S&P Index has been down for five of the previous six trading sessions.  This ought to take some of the positive energy out of this technical event.

    Nevertheless, good economic news today, progress in Europe and the “golden cross” may lead to a pause in the run of record low mortgage rates today.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  9. Mortgage Rates: Record Lows Daily?

    By on January 30, 2012

    Mortgage rates look to fall even lower today as a busy week for economic data gets underway.  On-going drama in Greece combine with the busy economic calendar to make this a crucial week for establishing the rate trend for 2012. So far, anyway, it looks like a positive trend for rates.

    The first big report of the week, the Personal Consumption and Expenditures report indicated that consumers pulled back on spending in December despite an increase in their income.  Most analysts are interpreting this as a sign of a slow-down ahead for early 2012. Once again I would urge caution in this interpretation.

    Annual consumer spending rose for 2011 by 4.7%, the largest margin in four years. A dip of .1% in the December expenditures portion of the PCE report, while breaking the string of three consecutive positive months, does not signal a trend reversal all by itself.  Particularly when you remember that the PCE report is adjusted for inflation.  According to the PCE’s own inflation component, prices increased by 2.0% rather than the 1.0% forecasted.  This largely accounts for the so-called “drop” in consumer spending.

    The never-ending Greek drama continues to play out.  Last week it was negotiations with private bond holders that dominated the scene.  After reaching an agreement with private bond holders to cut their payouts by 70% the attention now turns to how the remaining budget shortfall will be made up.  Will Greece be forced to cut spending further or will additional loans come from European nations and the ECB?

    Over the weekend the idea of installing a Eurozone budget overseer who would have the power to veto budget measures from Greece.  As you might imagine, that idea did not go over very well in Greece.  One official stated that such a measure would force Greece to choose between “financial assistance” and “national dignity”.

    The rest of the week will provide a great deal of additional economic data on the strength or lack thereof in the US economy. Chicago PMI (a gauge of manufacturing in the Chicago region) and consumer confidence reports will be released on Tuesday.  Wednesday provides the ADP Employment Change report along with construction spending and the ISM index (manufacturing).  Thursday’s key reports include the weekly jobless claims report and productivity report.  Finally, on Friday we will see the Non-Farm Payrolls report , Factory Orders and ISM Services.

    Current low mortgage rates are not justified by the economic data available to date.  Perhaps this week’s data will show developing weakness in the US economy and support the recent moves downward. Nevertheless, for the time-being consumers needing a mortgage for a refinance or purchase transaction can be comforted in knowing that rates have never been lower.

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

  10. Mortgage Rates: GDP Pushes Rates to Record Lows?

    By on January 27, 2012

    The first look at the US Gross Domestic Product for the 4th quarter of 2004 was the strongest in 1 ½ years.  And while news of economic strength usually sends mortgage rates higher today it appears to be sending them lower.  Why?  Because the expectations of economists prior to the report’s release was for even stronger growth.   Perhaps traders of stocks and mortgage-backed securities will realize that this data is hardly worth relying on for guiding their positions since this early look at GDP each quarter is often revised significantly before being finalized.  This report will be revised on February 29 and won’t be finalized until March 29.  According to the US Bureau of Economic Analysis, the group that produces the GDP reports the average change between the “Advance Estimate” and the “Final” is greater than 1.0%!  So despite the early improvement in mortgage rates this morning, consumers needing a mortgage for a refinance or purchase should not expect further moves down today.

    Reports out of Europe suggest that a deal between Greece and its private bond holders to reduce their payout is “very close”.  While I know we have heard this before—I actually believe it because these bond holders really have no viable alternatives.  Should they allow Greece to default in a disorderly manner it would put all their other European debt holdings at much greater risk as global investors would likely devalue all things European.

    At 10 AM ET today the January Consumer Sentiment report will be released.  Expectations for this report are for it to be flat—but flat at a very strong level.  Should this report surprise significantly it could move mortgage rates.  I do expect this report to come in close to expectations—or if there is a surprise for it to be to the high side.  If I am correct than the greater risk later today is for a slight uptick in mortgage costs rather further improvement.

    Have a great weekend!

    Category: Current Mortgage Rates, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Mortgage Rates, Purchase, Refinance

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