Rate Lock Advisory - Thursday Oct. 20th



Thursday’s bond market has opened in positive territory due to early stock weakness. Today’s economic data didn’t reveal many surprises and has not caused much movement in the markets. The Dow is currently down 49 points while the Nasdaq has lost 29 points. The bond market is currently up 9/32, but we will likely see little change in this morning’s mortgage rates.

Yesterday’s afternoon release of the Fed Beige Book didn’t cause much alarm. It indicated that economic activity had slowed in many Fed districts from the last release, but signs were evident that the economy had not slipped back into a recession that some had feared. Many districts had reported minor increase in business and consumer spending, easing some concerns that the economy was about to slip back into a recession. The report was taken as neutral news for the bond market and mortgage rates.

The Labor Department announced early this morning that 403,000 new claims for unemployment benefits were filed last week, matching analysts’ forecasts. An upward revision to the previous week’s total means we actually saw a decline in new claims, which can be considered negative for the bond market. However, it was not enough of a decline to draw much attention.

Late this morning, the Conference Board posted September’s Leading Economic Indicators (LEI). They said that the LEI rose 0.2%, meaning that it is predicting modest economic growth over the next several months. Analysts were expecting to see a 0.3% increase, so this release gave us weaker than forecasted results. Unfortunately, this is not enough of a variance in a moderately important report to help improve mortgage rates. As with the rest of this morning’s data, it is having little impact on today’s mortgage rates.

Today’s final report came from the National Association of Realtors, who said that sales or existing homes fell 3% last month. This was a larger than expected decline, but only because August’s sales were revised a little higher than previously announced. Without the revision, sales levels nearly matched forecasts. This means that no major surprises came in the report, preventing it from influencing bond trading and mortgage pricing.

Tomorrow has no relevant economic data scheduled for release, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. If the major stock indexes put together a sizable rally, bonds will likely suffer and we will see a small increase to mortgage rates. On the other hand, stock weakness could lead to lower rates. I would not be surprised to see a fairly quiet day as the markets prepare for next week.

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.