Lenders Keep Mortgage Rates Priced at Aggressive Levels
Mortgage rates moved sideways near the lowest levels of 2010 yesterday as benchmark interest rates had little motivation to move in either direction. This allowed lenders to keep rate sheets unchanged on the day. "No trend" seems to be "the trend" in the financial markets lately. Both stocks and bonds have held to a tight range and mortgage rates have held steady.
We have a couple economic reports to discuss today.
The Department of Labor released the weekly jobless claims. This report provides three measures on the health of the labor market:
- Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits
- Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job
- Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits
Since our economy is driven by consumer spending, economists track employment data to get a sense of future economic momentum. Higher jobless claims lead to less consumer spending, which is bad for the overall economy but generally helpful in keeping mortgage rates low. The recent trend has indicated the labor market to be improving with the last report being the third consecutive week of lower jobless claims but the number of Americans who have been without a job for more than 27 weeks remains at very high levels.
The report showed that initial claims, for the week ending May 8, fell 4000 to 444,000 for the fourth consecutive weekly decline. The prior week’s number was revised higher from 444,000 to 448,000. Continued claims rose 12,000 to 4.63 million. The number of Americans who are collecting Emergency and Extended Benefits fell by about 200,000 to 5.36million.
Released at the same time was Import and Export prices which gives us a read on inflation. Today’s report showed that the prices of items we import rose 0.9% in April while the price of exported items increased 1.2%. Higher export prices reduces foreign demand for our products as they search for a lower price from other countries which can hurt our economy. With sovereign debt concerns hurting overseas economies, the US dollar has strengthened considerably over the last few weeks which will continue to pressure export prices higher. This report is not nearly as important as the Consumer Price Index or the Personal Consumption Expenditure reports which do show inflation to be in check. The CPI report will be released next week.
We had our last Treasury auction of the week today. The Treasury successfully sold $16 billion 30 year bonds. Just like the previous two auctions of the week, demand was strong today. As stated earlier, global investors are not feeling so confident about investing in European markets, this helps attract demand to dollar denominated assets like U.S. Treasuries. This is another example of a "flight to quality".
Once again...mortgage rates continue to hold steady near their most aggressive levels of the year.
Reports from fellow mortgage professionals indicate lender rates sheets to be very similar to yesterday, and the previous day. 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 looking to access equity in your home, you should expect higher costs or a slightly higher interest rate.
With rates at the best levels of the year, I continue to advise locking all loans closing within 30 days and also encourage you to consider longer term locks if your loan is closing beyond 30 days. Stocks have been the primary influence over mortgage rates lately, if stocks rally, mortgage rates will rise. On the other hand, if stocks sell off, lenders have proven they are unwilling to push mortgage rates lower than current levels. With that in mind I do not see enough reward to justify floating in this environment.