Rate Lock Advisory

Thursday, January 26th

Thursday’s bond market has opened in negative territory following mostly unfavorable economic news. Stocks are mixed, pushing the Dow down 28 points and the Nasdaq up 97 points. The bond market is currently down 7/32 (3.47%), but gains late yesterday should still allow this morning’s mortgage rates to be approximately .125 of a discount point lower than Wednesday’s early pricing. If you saw a late improvement in rates yesterday, you may see a slight increase this morning.



30 yr - 3.47%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



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

Yesterday’s 5-year Treasury Note auction went well with the benchmarks we use to gauge investor demand showing a strong interest in the securities. Bonds reacted favorably after results were posted at 1:00 PM, causing some lenders to improve pricing before the end of the day. Those results allow us to be optimistic about today’s 7-year Note sale. Another strong demand from investors could lead to an afternoon improvement in rates today also. They will be announced at 1:00 PM ET.



Gross Domestic Product (GDP)

The first of this morning’s batch of economic data was the initial reading of the 4th quarter Gross Domestic Product (GDP) at 8:30 AM ET. It revealed the U.S. economy grew at a 2.9% annual rate during the last three months of the year, exceeding the 2.6% that was predicted. The stronger headline number clearly makes the report bad news for bonds and mortgage rates. However, there are positives in the data also, such as a slower growth pace than the 3rd quarter’s 3.2%. Furthermore, the details in the data indicate the growth was front-loaded, meaning the quarter started out very strong but by the end of the year had slowed noticeably. That tidbit allows us to be optimistic that weaker economic conditions in the first quarter will allow mortgage rates to move lower during the spring months.



Durable Goods Orders

Also early this morning was the release of December’s Durable Goods Orders report. The Commerce Department said that new orders for big-ticket items such as airplanes, appliances and electronics rose a surprising 5.6% last month, blowing past estimates of 2.9%. While the big jump can be considered bad news for rates, as with the GDP reading, there is some good news behind that headline number. First, this data is known to be quite volatile from month to month, so the variance isn’t as meaningful as it would be if it came in most other releases. Second, a reading within the report that excludes more costly and volatile airplane and other transportation orders came in much closer to forecasts than the main reading did. Still, we have to label the report as unfavorable for mortgage rates.



Weekly Unemployment Claims (every Thursday)

Today’s third release was last week’s unemployment figures that showed only 186,000 new claims for benefits were filed, down from the previous week’s revised 192,000. Forecasts pointed towards an increase in claims, not a decline. Therefore, as a sign of strength in the labor market, this data is also bad news for mortgage pricing.



New Home Sales

Closing out this morning’s releases was December's New Home Sales report at 10:00 AM ET. The Commerce Department reported a 2.3% rise in sales of newly constructed homes. Analysts were expecting them to fall from November’s level, but the numbers are skewed because of a large downward revision to November’s sales. The actual number of transactions was close to expectations, allowing us to consider the data neutral for rates.



Personal Income and Outlays

Tomorrow brings us a couple more relevant economic releases, starting December's Personal Income and Outlays data at 8:30 AM ET. This report gives us an indication of consumer ability to spend and current spending habits, making it relevant to the bond market and mortgage rates. Forecasts are calling for an increase in income of 0.2%, signaling consumers had slightly more money to spend in December than they did in November. The spending reading is expected to slip 0.1%. Stronger readings would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Weaker than expected numbers would be considered favorable news for the bond market and mortgage rates. Adding to the importance of this report is the fact it includes the Fed's preferred inflation index (Core PCE), which is predicted to rise 0.3%.



Univ of Mich Consumer Sentiment (Rev)

The final economic report of the week will be the revised January reading to the University of Michigan's Index of Consumer Sentiment at 10:00 AM ET. This index is a measurement of consumer confidence that is thought to indicate consumer willingness to spend. Analysts are expecting to see little change from the preliminary reading of 64.6. An upward revision would mean consumers are more likely to make a large purchase in the near future, fueling economic growth. The lower the reading, the better the news for rates.

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.

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