Mortgage Rates Hold Near Six Month Lows. Still Locking Loans

In a volatile session, mortgage rates ended yesterday's session unchanged as a small rally in benchmark Treasuries helped support the MBS market.  Following weaker than expected economic data in the morning, rates rallied. However as profit taking took place later in the day, early session strength was lost and MBS prices returned to opening levels.  Overall, even though prices moved about a relatively wide range, rates remained unchanged on the day.

The Mortgage Bankers’ Association this morning released their weekly applications index. This data tracks the weekly change in the amount of mortgage applications at major lenders.   An increasing trend is positive for the economy in two ways.  First, more home purchases leads to more home construction and consumer spending as the home buyer buys items to fill the new home.  Second, higher amounts of refinancing  should also lead to higher consumer spending as homeowners refinance to lower rates and lower payments giving them more money to spend into the economy.   The report shows that purchase applications have fallen again down 4.7% following last week’s plunge of 11.7%.  The refinance activity posted a modest 1.4% increase following the prior week’s 11.3% increase as homeowners rush to lock in low mortgage rates. SEE CHARTS HERE

Besides the mortgage application data released by the MBA, we also received a read on housing construction from the Commerce Department, Housing Starts.  This data totals the number of new homes that construction has started on an annualized basis.  More home construction leads to more construction jobs and increased spending as goods are bought to build and furnish new homes; as such, MBS generally move higher with a lower reading while the stock market likes to see increasing housing starts.     More importantly, this report  totals the number of homes where a building permit has been issued.   Recent reports have indicated a bottoming of this data, economists surveyed expected this report to continue that trend.

The report indicated that home builders are breaking ground on much fewer homes than expected.  Housing starts plunged almost 11% to a yearly pace of only 529,000.  Housing permits also came in considerably lower than expected at 552,000 after last month’s annual pace of 575,000.  

The final report to hit  news wires this morning was the Consumer Price Index.  This report measures the change to the average price level of a fixed basket of goods and services purchased by consumers which represents the rate of inflation.   All recent reports have shown inflation to be of no concern today and that trend was expected to continue.   Like the PPI report we received yesterday, this data gives us two readings, overall CPI and the core CPI.  The core reading strips out food and energy prices due to their volatility. 

The report indicated that consumer prices rose 0.3% in October, this  followes a 0.2% rise last month. The core rate moved higher by 0.2%, matching last month's increase, both slightly higher than expected.   On a year over year basis, overall consumer prices are down 0.2% while the core rate shows a 1.7% increase in consumer prices, which is within the Fed’s comfort zone.

Reports from fellow mortgage professionals indicate that mortgage rates are unchanged from yesterday.   This keeps the par 30 year conventional rate mortgage in the 4.625% to 4.875% range for well qualified consumers.  To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking to access equity in your home, you should expect either higher closing costs or a higher interest rate. 

Is everybody who is closing in the next 30 days locked yet?