Mortgage Rates Fail to Hold Below 5.00%

In what has become a common occurrence of late, mortgage rates failed to hold below 5%. 

Following a sizable rally earlier in the week, mortgage backed securities prices fell nearly a full point yesterday. Consequently lenders were forced to reprice for the worse multiple times  and mortgage rates moved higher.  By day's end the par 30 year fixed rate mortgage had moved  to 5.25% after reaching 4.875% on Wednesday.

There are a couple reasons for the move higher.  First, new home sales came in stronger than expected with the monthly supply dropping from 9.8 to 9.4 months.  This data set along combined with some better than expected earnings reports helped spark momentum in stocks. As equities rallied, market participants not wanting to miss the profit train sold their risk free TSY investments and bought higher yielding stocks. Lastly, the Treasury department announced they will auction $115 billion TSY notes next week. This was slightly higher than the market was expecting, and although the added supply of debt was in short term maturities, Treasury yields still moved higher.

The only scheduled data set today is the final July Consumer Sentiment number.  This is a telephone survey of 500 households conducted by the University of Michigan's Consumer Survey Center. Consumers are polled on their attitudes regarding personal financial conditions and their general attitude about the economy.  An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save.  Since our economy is driven by consumer spending, the stock market likes a higher reading while the fixed income sector prefers a lower reading. Today Consumer Sentiment was revised up to 66.0 from the 64.6 reading in early July, economists were expecting this print would only be revised up to 65.0.  Consumer sentiment was generally better as stock markets have improved and gas prices have fallen, not to mention some "less worse than expected" economic data.

Today is expected to be a relatively quiet day on Wall Street. Reports from fellow mortgage professionals indicate that the par 30 year conventional rate mortgage is in the 5.125% to 5.375% range for the most qualified consumers. 

On a side note, I have traveled to the great state of Virginia to celebrate my parents 80th birthday and a family reunion.  This is making me unavailable today to answer readers comments and update you on the economic data.   Make sure you visit Matt and AQ's MBS Commentary blog.  They will keep you posted as to the intraday movements of MBS and how it relates to mortgage rates.