Rate Lock Advisory – Wednesday Apr. 24th

I’m always asked, should I lock in my mortgage rate.  The answer depends on many variables that are individual to each borrower and current market conditions.  I follow the mortgage backed securities (MBS) and residential finance markets closely in order to be ready for questions like this.  Currently, our stance is that floating your rate is safe if you are not planning to settle in the next week.

This is from a mortgage rate advisory service I subscribe to . . .
“Wednesday’s bond market has opened in positive ground following favorable manufacturing news. The stock markets are showing minor losses, partly as a result of the same data that has pushed bonds slightly higher. The Dow is currently down 16 points while the Nasdaq has lost points. The bond market is currently up 3/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

March’s Durable Goods Orders was this morning’s only relevant economic data. The Commerce Department announced early this morning that new orders for big-ticket products fell 5.7% last month. That was a larger decline than the 3.1% that was expected and fairly significant swing of 10.0% from February’s revised 4.3% increase. Also worth noting is a 1.4% decline in a secondary reading that tracks new orders excluding larger transportation-related items such as new airplanes. Analysts were expecting to see no change in that reading. Both readings indicate weaker than expected manufacturing activity, making the data good news for the bond market and mortgage rates.”

Today also brings us the first of this week’s two relatively important Treasury auctions that could influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes today and 7-year Notes tomorrow. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually makes bonds more attractive to investors and brings more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of today’s auction will be posted at 1:00 PM ET, so look for any reaction to come during afternoon hours.

The only economic data scheduled for release tomorrow is the weekly unemployment update from the Labor Department. They are expected to announce that 351,000 new claims for unemployment benefits were filed last week. This would be little change from the previous week’s total of 352,000. A decline in new claims points toward a strengthening employment sector, making it bad news for mortgage rates. Ideally, bond traders would prefer to see an increase in claims that hints at a softening employment sector. However, because this report tracks only a single week’s worth of initial claims, it usually takes a wide variance from forecasts for it to draw much attention to affect mortgage rates.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float 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.

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