Mortgage Rates Move Sideways At 2010 Lows. Still Locking Loans

Mortgage rates held steady near the lowest levels of the year yesterday as both stocks and bonds ended an "up and down" session relatively flat.

Early this morning, the Mortgage Bankers Association released their Weekly Mortgage Applications Survey.   The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  The data gives economists a look into consumer demand for mortgage loans.  A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole.  

This was our first opportunity to guage loan demand without the help of the home buyer tax credit. Michael Fratantoni, MBA's Vice President of Research and Economics sums up the lending environment:

"The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefited US mortgage borrowers last week. Rates on 30-year mortgages dropped to their lowest level since mid-March.  As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks....In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later."

We have been discussing that "flight to quality" quite often lately and as expected, purchase demand fell following the expiration of the homebuyer tax credit. Now the entire housing industry will be put to test. Are their willing and able potential homeowners out there??? We will find out just how strong housing is in the months to come.

For more charts and a discussion on post-tax credit seller incentives: READ THE MND STORY

The only other economic report to hit wires this morning was Balance of Goods and Services Trade or as it is commonly known, the International Trade Report. Trade balance data reports the difference between the monetary value of a country's exports and imports.  A positive balance, or trade surplus, means exports exceed imports and illustrates that a country's economy is globally competitive.  A negative balance of trade is known as a trade deficit or trade gap. The US currently runs a trade deficit.

A globally competitive economy creates more jobs for Americans because US companies must work to satisfy several sources of demand, from domestic and foreign consumers.  Greater production translates into faster growth of local economies and a stronger consumer balance sheet, ultimately leading to increased corporate profits and higher stock prices.  However, an over dependence on foreign demand for US goods and services implies the domestic economy is vulnerable to foreign economic disruptions.

From the Release:

"The U.S. monthly international trade deficit increased in March 2010, according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit increased from $39.4 billion (revised) in February to $40.4 billion in March, as imports increased more than exports."

This was basically in line with expectations but still the widest the trade gap seen since December of 2008. The interest rate markets had no reaction to the data point.

The most mortgage rate influential event of the day was supposed to be the Treasury's auction of $24 billion of 10 year notes. However the auction results came and went, demand was healthy and once again there was no reaction in the markets.  The was a theme today...all the way up until the last minutes when stocks rallied to their intraday highs and benchmark Treasury yields rose which pushed mortgage-backed security prices to their lows of the day. Fortunately the selloff was not big enough to warrant reprices for the worse, but we are  however now heading into tomorrow with greater potential for higher mortgage rates.

Reports from fellow mortgage professionals indicate that lender rate sheets are once unchanged from yesterday.  The par 30 year conventional rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers.  To secure a par rate on a conventional mortgage 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 seeking a 15 year term, you should expect a par rate in the 4.25% to 4.50% range with similar costs but lower FICO score requirements. 

I continue to advise locking all loans closing in the next 30 days and also recommend you consider longer-term locks if your loan is not closing in the next 30 days.