Dennis' Mortgage Blog

Question of the week: No Question of the week this week, just a brief rate and market update

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While a short week with the Thanksgiving holiday and abbreviated trading today it was an active one for Mortgage Backed Securities (MBS) and the bond markets.  Active in not such a good way.  The Treasury Department had two auctions this week, one for five year bills on Tuesday and one for seven year bills on Wednesday.  Investors were not too keen on either one.

Lack of investor interest equates to lack of demand.  Lack of demand means lower prices to create sales.  In bond markets lower prices mean higher yields. Yields are interest rates.  Wednesday was particularly gruesome with MBS opening well below Tuesday’s close and then dropping further following the Treasury actions.

A bit of a rebound on light trading today.  Stock markets fell as renewed concern over European debt markets affected the flow of investments and many parking their funds in the safety of U.S. bonds for the weekend as the world watches developments on the Korean Peninsula.

In economic data released this week a bit of a mixed bag.  Gross Domestic Product came in at an annualized figure of 2.5%, enough to keep chugging along but not enough to reverse unemployment numbers.  Looking to lower unemployment numbers, investors did react to a lower than expected initial jobless claim release of 407,000 workers—the lowest since the beginning of the recession.  Countering this positive news both existing and new home sales were down.

Mortgage Backed Securities are trading at their lowest levels since July.  Following the high mark on November 4^th MBS markets appear to have settled in the current range when the current near bottom was reached on November 15^th after five negative trading days out of six.

The week after next the Treasury auctions 30 and 10 year bonds—targets of the Federal Reserve asset purchasing program (or QE2).  Reaction to the offerings will most likely dictate if we are experiencing a temporary correction in the mortgage and bond markets and lower rates are ahead, or if this is the new “low” until the next series of rate adjustments upward.

Rates for November 26, 2010:  Despite the huge moves on Wednesday conforming rates ($417,000 and below) are unchanged from last Friday.  High-balance, or conforming jumbo, rates leapt from last Friday to highest rates since early summer.  Depending on your transaction, FHA might be cheaper in the long run, even with the mortgage insurance.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional                             4.25%               Flat

30 year conforming-jumbo                    4.625%             Up 0.25%

30 year FHA                                         4.25%               Flat  

30 year FHA jumbo                              4.375%             Up 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. 

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

What a beautiful Thanksgiving Day in Southern California yesterday, made all the more so with family and what we have to be thankful for in our lives.  Professionally I am very thankful, and grateful, for my clients past, present and future and business relationships that support my business and clients.  I hope everyone had a wonderful day.

Have a great week,

Dennis