Rate Lock Advisory

Thursday, August 13th

Thursday’s bond market has opened up slightly despite unfavorable economic news. Stocks are mixed again with the Dow down 24 points and the Nasdaq up 60 points. The bond market is currently up 2/32 (0.68%), which with yesterday’s late strength should have improved this morning’s mortgage rates by approximately .125 - .250 of a discount point. Unfortunately, overnight news from the agency that regulates a key part of the mortgage market is likely to cause an increase in refinance rates this morning despite those bond gains (see below). Believe it or not, rates for purchase transactions should still see an improvement this morning.



30 yr - 0.68%







Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock



Weekly Unemployment Claims (every Thursday)

This morning’s only relevant economic data was last week’s unemployment figures that showed 963,000 new claims for benefits were filed. This was lower than expected, a decline from the previous week and broke a streak of 20 consecutive weeks of over 1 million new filings. While the decline indicates the employment sector improved slightly last week, the high number also means the sector is still struggling. However, since the number was below forecasts we need to consider the data bad news for mortgage rates.



Treasury Auctions (5,7,10,20,30 year securities)

Yesterday’s 10-year Treasury Note auction went relatively well with the benchmarks showing a slightly above average level of interest in the securities. The bond market did react favorably to the results when they were posted but did not create enough of a move to improve rates. A strong demand in today’s 30-year Bond auction could help boost bond prices and slightly lower mortgage rates after results are posted at 1:00 PM ET.




Before we get into tomorrow’s economic releases, it is worth noting an important announcement last night from the Federal Housing Finance Agency (FHFA). The FHFA supervises Fannie Mae and Freddie Mac, who are the entities that buy a significant number of residential home loans from mortgage lenders to keep the mortgage market liquid. The unexpected announcement was a new fee of .5% of the loan amount added to all refinances sold to either entity after September 1 of this year. While this is technically charged to the originating lender that sells the loan, it will undoubtedly be passed on to the borrower in their pricing. This fee will apply only to refinances (not purchase transactions) that qualify under conforming loan limits. The announcement creates a huge incentive to close and fund any pending refinance loans this month to avoid the fee.



Retail Sales (consumer spending)

Tomorrow brings us four economic reports for the markets to digest, one of which is considered to be highly important. That would be July's Retail Sales data from the Commerce Department at 8:30 AM ET. It will give us a measurement of consumer spending, which is extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 1.9% increase in sales. Analysts are also calling for a 1.5% rise in sales if more volatile and costly auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth. Ideally, we will see smaller increases that should lead to lower rates.



Productivity and Costs (Quarterly)

Employee Productivity and Costs data for the second quarter will also be released early tomorrow morning. It helps us track employee output per hour worked. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don't see this being a big mover of mortgage rates, especially coming on a day with three other releases that include a major report. A sizable increase in productivity and a smaller than expected rise in labor costs would be favorable news for bonds.



Industrial Production and Capacity Utilization

The third release of the day will be July's Industrial Production report at 9:15 AM ET that measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 3.0% increase from June's level. A smaller rise would be considered good news for mortgage rates because it would show manufacturing activity was softer than thought and broader economic growth will be more difficult.



University of Michigan Consumer Sentiment (Rev)

Finally, the University of Michigan will post their Index of Consumer Sentiment for August at 10:00 AM ET. This report will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a decline from July’s 72.5, meaning confidence was softer this month than last and that surveyed consumers are less likely to make a large purchase. Good news for mortgage rates would be a sizable decline.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.