UPDATED: Mortgage Rates Await Jobs Data. Closing Costs Cheaper
NO CHANGE IN MORTGAGE RATES TODAY. PERHAPS A FEW MORE LENDERS ARE OFFERING PAR QUOTES BELOW 4.25% BUT NO QUOTE IS MONUMENTALLY BETTER THAN IT WAS YESTERDAY. IF YOU'RE FLOATING YOUR LOAN, YOU ARE BETTING ON A WEAK EMPLOYMENT REPORT
sorry for yelling.
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Mortgage rates ended the previous week just above record lows. The best mortgage rates were offered on Tuesday afternoon and Wednesday morning. Lenders were quoting par rates below 4.25% for a brief time.
The week ahead isn't exactly jam-packed with data, in fact there really isn't all that much on the calendar, but that doesn't mean the market isn't paying very close attention to what data is being released. It's all about quality rather than quantity this week. The most influential economic report of the month hits newswires on Friday: The Employment Situation Report
Economists
polled by Reuters currently believe the report will show the labor
market was flat in September after 54k jobs were lost last month.
Private employment is expected to have risen by more than 80,000, but
that increase was offset by the expiration of temporary Census jobs.
“The labor market evidence continues to point to job creation, but at a
slow pace,” said economists at IHS Global Insight. “We expect headline
employment to fall 5,000, as more than 70,000 temporary Census workers
were released in September. This is the last time that Census layoffs
will distort headline employment, because only 6,000 temporary Census
workers remained in place as of mid-September.”
The Unemployment Rate, currently at 9.6%, is expected to remain put or
rise by one-tenth. “We forecast that the unemployment rate rose to 9.7%
during the month from 9.6% previously,” said economists at Nomura. “Our
call reflects both our expectations for weak job growth and also a
forecast of healthy labor force gains.”
Also, the BLS will release an estimate for annual benchmark revisions to
the prior year of data. “Last year at this time the BLS announced a
tentative 824k downward revision to the level of March 2009 payrolls,
the biggest ever,” Deutsche Bank noted. “The fact the economy has been
growing over the past four quarters — it grew 3.7% in Q1 2010 — suggests
to us the preliminary benchmark revisions announced by the BLS next
week will be positive.”
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Investors generally act in a more defensive manner before this report is released because labor market data holds the potential to alter long term outlooks and investment strategies. Rate watchers should be on the alert for increased amounts of bond price volatility. This is a factor of fewer market participants actively investing their funds in the marketplace (lack of liquidity). This implies we might be sending a few more loan pricing alerts than normal in the days ahead.
Loan pricing improved today, cheapening up closing costs a few basis points. Most lenders offered lower consumer borrowing costs on their first release of loan pricing. Some were a little more apprehensive early in the morning. These lenders ended up repricing for the better.
Overall, the best par 30 year fixed mortgage rates remain in a range between 4.25% and 4.50%. We are seeing a greater number of lenders quoting rates below 4.25% today vs. Friday, but this is not broadbased behavior. The best par 15 year mortgage rates are in a range between 3.625% and 3.875%. Originators will only be able to offer these rates to borrowers who have perfect credit profiles and enough equity in their home to qualify for a refinance. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan a riskier investment.
MBS are currently at the high side of our price range. We've always advised locking when MBS are at the top of our price range. This range has proven to be a reliable lock/float indicator. If you are able to lock in your loan, we think today is great day to do so. If you are unable to lock in your loan today, don't worry...
While we do not yet see a reason to believe
mortgage rates will dip below the record lows offered by lenders last
week, we do expect the uncertain economic environment and the potential
for Federal Reserve quantitative easing to keep mortgage rates in a very
aggressive range for an extended period.
If you are a consumer looking to refinance your loan, we recommend you
submit a loan application as soon as possible. This will ensure you are
capable of locking in your borrowing costs if mortgage rates touch
record lows again. Remember these below market quotes have only been
offered for a short period of time, so you must be ready to lock when
lenders push rates to record lows.
The "best executed" lock/float strategy comes down to finding an
originator who knows the loan market, studies underwriting guidelines,
and just plain old gets the J.O.B done. You have to let the loan
officer earn their commission. That's how you "ride the float boat" in
this environment...make sure you have a damn good skipper. Plain and
Simple.