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Mortgage Market Comment

posted Aug 27, 2012, 8:03 AM by Massey Kouhssari

Mortgage bond prices finished the week significantly higher which helped mortgage interest rates fall. Rates were choppy the beginning of the week following speculation that the European Central Bank would implement a plan to purchase member nation debt to keep their borrowing costs in check. Data was mixed but higher than expected weekly jobless claims and the Fed minutes, which indicated further easing is likely, helped rates improve considerably Wednesday afternoon and Thursday morning. Mortgage interest rates finished the week better by almost a full discount point despite a selloff from the highs Friday afternoon.

 

Looking Ahead

 

Economic

Indicator

Release

Date and Time

Consensus

Estimate

 

Analysis

Consumer Confidence

Tuesday, Aug. 28,

10:00 am, et

65

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

2-year Treasury Note Auction

Tuesday, Aug. 28,

1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

Q2 Gross Domestic Product

Wednesday, Aug. 29,

8:30 am, et

Up 1.4%

Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.

5-year Treasury Note Auction

Wednesday, Aug. 29,

1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

Fed “Beige Book”

Wednesday, Aug. 29,

2:00 pm, et

None

Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.

Weekly Jobless Claims

Thursday, Aug. 30,

8:30 am, et

370k

Important.  An indication of employment.   Higher claims may result in lower rates.

Personal Income and Outlays

Thursday, Aug. 30,

8:30 am, et

Unchanged,

Up 0.1%

Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.

PCE Core Inflation

Thursday, Aug. 30,

8:30 am, et

Up 0.2%

Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.

7-year Treasury Note Auction

Thursday, Aug. 30,

1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.

U of Michigan Consumer Sentiment

Friday, Aug. 31,

10:00 am, et

71

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Factory Orders

Friday, Aug. 31,

10:00 am, et

Up 0.1%

Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.

                               

MARKET CONDITIONS

There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets. While stocks and bonds are swinging around wildly there is some good news.  Interest rates for conforming and FHA/VA loans are historically very low.

 

Remember, low rates are not a given considering the uncertainty in the financial markets. Inflation, real or perceived, erodes the value of bonds causing bond prices to fall and rates to rise. The last thing the economy needs now is raising mortgage interest rates. With so much uncertainty, a cautious approach to float/lock decisions would be wise.

 

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