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On the first Friday of every month, at 8:30 AM ET, the U.S. government releases the Non-Farm Payrolls report, except most people don't call it that. They call it "the jobs report". Tomorrow is the first Friday of the month. The jobs report has always been influential with respect to mortgage rates but, lately, it's of larger import. This is because Wall Street believes that jobs growth is the way forward for the economy. No jobs, no growth.
When the economy hit the skids in September 2008, the government made a massive intervention. In addition to formal stimulus from Congress, the Federal Reserve did what it could to loosen up the credit markets. One of the Fed's most well-known programs was its commitment to buy $1.25 trillion in mortgage-backed bonds in the open market. Internal studies from the Fed say the program lowered rates by 1 percent last year. The program ends March 31, 2010.
Studies from inside the Fed say the group's intervention lowered rates by 1 percent last year. We've been getting low rates because the mortgage-backed market is "artificial". The Fed is a non-natural buyer. Starting April 1, 2010, though, life goes back to normal. The Fed is ending its support and the market will be left to its own. It will be ugly for mortgage rate shoppers.
January's job report and retail sales report both went negative, and Pending Home Sales failed to impress. Furthermore, there's been a general softness about the economy and Fed members have gone silent on Fed Funds Rate matters. It's a reversal from December and expectations for 2010 are dialed back a bit. Mortgage rates are falling, but have likely bottomed out.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction. The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago. Here's what to expect:
With consumer confidence on the mend, net job gains nearing zero, and Retail Sales rebounding, Wall Street had bid up mortgage rates this month. Mostly, the trading was just jockeying for position ahead of the December 15-16 FOMC meeting. Investors were worried that the Fed would blink; that it would change its economic outlook for 2010 and have to start raising the Fed Funds Rate sooner than forecast; that inflation fears would return. Instead, none of that happened.
At this time last year, our spirits were squashed. Today, though, we have hope. And as the nation regains its footing from what should have been the worst economic depression on record, there's now lingering uncertainty on Wall Street about what's due for the country in the months and years ahead. Rate shoppers be ready.
A year ago Thanksgiving, mortgage rates reached an all-time low. We're approaching those same all-time levels again. But unlike last year, rates should stay low for longer than an hour or two. Mortgage rates will be suppressed until such time as consumer spending returns.
Consumer spending drives the economy. Without spending, there's no growth and, as a result, tepid retail sales reports force Wall Street to rethink its bets on U.S. economic recovery.It's a primary reason why rates return to 5 percent again and again. The economy is back from the brink -- banks are healthier, investment is returning, household net worth is up -- but consumers continue to stand en garde. Confidence is down.A recovery is not a recovery until consumers buy-in. Literally. And, right now, that's not happening.
Since November 2008, 30-year fixed mortgage rates have been range-bound at 5. But 5 percent is unnatural given the current economy. We're not at the same place we were a year ago. Many of the contributing factors to the near-economic collapse are already in repair.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
Lately, mortgage bonds have been trading at unsustainable levels. Despite a growing mound of evidence that the economy is expanding and what looks to be an over-supply of treasury debt, mortgage-backed securities are priced as high as they've been since May. It's unnatural, really; a hedge against a stock market flop. Or something else. But forget about why rates are low -- low rates are about to end.
In currency markets, the U.S. dollar has been getting slaughtered. It's at a 2-month low against the Euro and is similarly weak against Asian currencies. But demand for dollar-denominated bonds is offsetting the expected rise in mortgage rates.
It's been a good few weeks for mortgage rates. While Wall Street waits for definitive data on the economy, traders have tended to take safe positions in the mortgage-backed securities market. Traders appear to believe the Federal Reserve's assessment about the economy picking up, but, nonetheless, they're making careful hedges with their bets. Furthermore, inflation appears contained (for now) and the U.S. dollar is recovering from its late-Summer beatdown. It's all helped push mortgage rates to their lowest levels since around the time the Phillies first took first place.
With Summer over and trading volume back to full strength, the market is turning a corner. It's increasingly clear that economy bottomed out sometime between February and May and Wall Street is no longer waiting for the other economic shoe to drop. Fed Chairman Ben Bernanke validated this position, saying the recession is "very likely over".
As a rate shopper, the most dangerous situation is when market fundamentals are inconsistent, forcing Wall Street to trade on sentiment instead. Because "gut feel" has no data to back it up, it leads to lopsided trading patterns that shove rates up and down with the wind. By contrast, fundamentals are something you can sink your teeth into.
Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction. Here's what I told Bankrate.com: "Demand for dollars-denominated bonds helps rates to ease lower."
Mortgage markets are a sensitive beast. Just the slightest breeze and they're all shook up. It's one reason why this blog covers such a wide berth. Jobs, housing, consumer confidence, spending -- it's all relevant. Each moves markets in its own right. And when mortgage markets move, mortgage rates move.
If we study the long-term mortgage rate pattern dating back to late-2008, we observe that mortgage rates have bounced within in a tight range for nearly 8 months, only breaking the upper and lower boundaries for brief moments in time. Conforming mortgage rates appear to be "stuck" near 5.250 percent with 0 points.
Americans no longer have Recession on the Brain like they did last September and October. Back then, the financial crisis was the leading story of every news-related show on TV and in print. The notable absence of these The End Of The World As We Know It-like messages may be one reason why consumer purse strings are starting to loosen. For the fourth straight month in May, Retail Sales figures were hotter-than-expected. Consumer spending accounts for the majority of the economy's activity and, now that spending is up, Wall Street is betting that businesses will prosper.
5 weeks ago, Wall Street was mostly convinced that the economy was about to turn a corner. At the time, traders were piling into the stock market, chasing big gains and selling everything risk-averse. Mortgage bonds were in very low demand and the supply glut pushed rates north of 6 percent. Since then, the world has calmed down a bit. Housing and manufacturing continue to show strength, but some key pockets of economic weakness have poked investors into taking some profits off the table. The Dow has since shed some of its gains since March and the action is causing mortgage bonds to improve.
today, mortgage rates are still higher than the government's "ideal" sub-5 percent level, but Wall Street isn't worrying about inflation as much. Data has improved in a lot of sectors, but it can't necessarily be categorized as "strong". Plus, gas prices are falling. Both of these developments are making a positive impact on mortgage rates and should continue to pressure rates lower over the next few weeks. All of that said, however, all it takes is one shock to the system and mortgage rates will blow right past 6 percent and won't look back.
With rising mortgage rates threatening the housing market's recovery and the employment sector showing signs of life, there was this pervasive nervousness on Wall Street pre-FOMC that the Fed would make a bold statement to keep the economy on track. This would have been awful for mortgage rates. More Fed action would have stoked inflation fears and inflation is a mortgage rate killer. But, because the Fed went the boring route, mortgage rates didn't move yesterday and remain in the same range they've been in all week.
Putting two-and-two together, I'm telling you for the last time: If mortgage rates get too close to 7 percent, the Federal Reserve will likely to accelerate the pace of its bond buys and may increase its commitment to the markets, too. At least temporarily, this would drive mortgage rates down in a hurry.
It's a common belief among Americans that the Federal Reserve controls mortgage rates. This is incorrect. If that were true, however, mortgage rates would have increased between 2004 and 2006 while the Fed was jacking the Fed Funds Rate from 1 percent to up over 5 percent.
Are mortgage rates going up? Are mortgage rates going down? Not so long ago, Wall Street-traded securities move on fundamentals -- the strength of the economy, the health of corporations, data like GDP and so on. It was a safe dance because traders almost always found somebody to take a counter-bet. Markets ebbed and flowed in an easy-going way with long-term trends taking months to develop. Lately, though, Wall Street's been binary in its trading pattern, it seems. Put the risk on the table with a move to equities, take the risk off the table with a move to bonds
Are mortgage rates going up? Are mortgage rates going down? get that interest rate. "Points", you may not know, is industry shorthand for "discount points" and it's expressed as a percentage of the amount borrowed. As an for-instance, 1 point on a $325,000 mortgage would cost $3,250. When it comes to shopping for, or reporting on, mortgage rates, most people forget about the "points" part of the equation. You probably even do it yourself. When you ask a mortgage guy, for example, "What're rates doing today?" you're completely discounting the question's second half. This chart illustrates it.
I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available. The Bankrate.com survey is for conforming mortgages. It does not apply to FHA mortgages, VA mortgages, jumbo mortgages, or foreign national mortgages. For rate quotes, email me directly. The group's 30-day...
For today's mortgage rate shopper, there's a lot going on with the economy, It's too much to pay attention to, really. And, on the surface, while most of the news has been decidedly negative, we're witnessing a gentle shift in trader psyche on Wall Street.
Mortgage markets have been a veritable mess lately. Rates want to move up, the government wants them to move down. It's reduced us to ia Mortgage Rate Tug-o-War between economic fundamentals and political rhetoric.
