Mortgage Rates Break Five Day Losing Streak

The four day streak of rising mortgage rates extended into Friday following a much better than expected nonfarm payroll report. After reaching 4.50% on Monday, mortgage rates rose 0.25% to .375% by Friday. The week ahead is fairly light in terms of economic data.    The only data due out today is Consumer Credit at 3pm eastern. 

Essentially, the only market moving events on Tuesday and Wednesday will be auctions of more U.S. debt.  The Department of Treasury will auction $40 billion 3 year notes on Tuesday followed by $21 billion 10 year notes on Wednesday.   As always, demand for our nation’s debt will determine the success of the auction.   So far this year, despite record amount of issuances, demand for our nation’s debt has remained quite strong which is one of many factors that have attributed to mortgage rates remaining near record levels. This is expected to continue heading into year end.

Thursday brings us the weekly jobless claims and International Trade.   Jobless claims are expected to come in at 460,000 while our trade balance is expected to post a deficit of $36.4billion.  In addition, there will be an auction of $13 billion 30 year bonds. 

Friday is the busiest day of the week. The morning starts out with important Retail Sales  data, the market  view this report as an indication of the health of consumer spending.  Last month’s report came in much better than expected, posting a 1.4% increase in retail spending.  This month’s report is expected to show another increase in spending, this time economists forecast a 0.9% increase, only 0.5% excluding autos.   A lower than expected reading could help mortgage rates while a better than expected report could pressure rates higher.

Out at the same time is the report on Import and Export prices,  which are a valuable gauge for inflation here and abroad.   All recent data on inflation shows it to be very well contained and this report is expected to confirm that trend. 

Lastly, we get Consumer Sentiment which lets market participants know how you, the consumer is feeling.  An optimistic consumer is more likely to spend money while a pessimistic consumer is more likely to save.   After peaking in September, the last two reports came in disappointingly low and expectations call for a slight rebound in this month’s report. 

For more on today and the week ahead, check out the MND STORY.

Reports from fellow mortgage professionals indicate lender rebate to be improved from Friday.  This places the par 30 year conventional rate mortgage in the 4.75% to 5.00% 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% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.   If you are not planning on keeping your home for many years, you may want to pay less in upfront fees but you will have to accept a higher interest rate. 

The speed and extent in which rates rose last week plus the market's consistent willingness to buy when rates move to the high side of the range implies we are due a corrective move lower, which is exactly what we have seen today. That said, Friday's float recommendation remains in place.   I do however remind all readers that lenders have proven unwilling to push rates lower than 4.50%..with that in mind, there is not  much room for rates to move lower, so if you are happy with the your current quote, now is a great time to lock.